You may have your finances in place, you may make budgets every month, you may take out a substantial amount of your income for savings and investments, you may even have an emergency fund tucked away for bad days. However, even after all these actions, you may end up needing instant cash for some of your imminent needs or wants.
In such cases, you may not want to withdraw your emergency fund or touch your savings. How do you tackle this situation? People usually say they have credit cards for such situations; however, a credit card has its limitations. The loan amount, the interest rates, the repayment schedule, all of these can make you think twice before opting for a credit card.
Money taken from moneylenders or friends and family too have their share of limitations and awkwardness.
During such times a personal loan can be the much-needed type of credit. Let’s look at some of the benefits of taking a personal loan over other types of credits:
- Unsecured loan
A personal loan is an unsecured loan, that is, you can take a personal loan without mortgaging or securing any assets. This makes it an ideal option.
- Repayment schedule
While a credit card typically has 45 days to repay the money, a personal loan offers a flexible repayment schedule. Depending on how soon you would want to close the loan or how long you will take to close the loan, you can choose the tenure for repayment.
- Interest rates
Interest rates for personal loans are comparatively lower than interest rates on credit cards, particularly if the loan amount is huge. Lower and competitive interest rates make your EMI more affordable and a personal loan more favourable.
- Simple criteria
To avail of a personal loan, the two main criteria are: you need to be above the age of 18 years and should have a minimum income of INR 15,000.
- Minimal paperwork
The two main documents that are mandatory for a personal loan are a PAN card and Aadhar card. Apart from these two, you may have to produce income proof depending on the type of income you have – salaried or self-employed. You can produce six months bank statement to that effect.
- Quick approval
While other loans may take a substantial amount of time for approval, a personal loan usually takes minimum time for approval once all your documents and eligibility criteria are met.
- Available for multiple usages
Unlike other loans, a personal loan can be used for a variety of purposes. You take a home loan to purchase a home, you take an education loan to pursue education, you take a two-wheeler loan to purchase bikes and scooters, etc. However, with a personal loan, you can do whatever you wish to. You can spend it on a phone, use it to upgrade your home, take a vacation, pay off smaller loans, spend on emergency medical bills, etc.
- Consolidate your debt portfolio
If you have multiple smaller debts either from credit cards, family, moneylenders, other loans, etc., it makes sense to get a personal loan and pay off all other smaller loans and keep one loan active. This helps in tracking your outstanding loans.
- Ease of application
With modern technology, you no longer need to visit lenders personally for taking loans. Instant cash loan apps like SimplyCash from the house of Hero FinCorp, allow you to apply for a loan through your smartphone. You simply need to download the lone app and after logging in you can apply for a loan.
You may have your finances in order, you may create monthly budgets, you may set aside a significant portion of your income for savings and investments, and you may even have an emergency fund set aside for rainy days. Even after taking all of these steps, you may find yourself in need of immediate cash for some of your pressing demands or desires.
You may not want to use your emergency fund or your savings in such a situation. What are your options for dealing with this situation? People frequently claim to have credit cards to cover such expenses; however, credit cards have their own set of restrictions. The loan amount, interest rates, and payback schedule are all factors that should make you reconsider using a credit card.