A personal loan is a quick fix to a range of personal and professional needs – whether it be financing a medical emergency, financing your child’s education expenses, consolidating all of their debt payments into one, or making a major purchase like buying your first home. Typically, this type of loan does not require you to deposit any collateral with a bank and is a simple form of financing if you adhere to a few preset parameters.
These include good credit (generally a score of 750 or more is considered good), age, employment status, regular monthly income, etc. Eligibility for a personal loan depends on it, and if you meet the standards, you would be eligible for this Qualify loan that offers an instant cash boost.
That being said, not all is rosy with a personal loan, and there are a few downsides too. The rest of the article attempts to weigh the pros and cons of having a personal loan so that you can make a wise decision in due course:
1. Multipurpose Loan
A particular advantage of a personal loan is that it is versatile; a financial product that allows you to meet a range of obligations regardless of their size. From financing your child’s education costs to buying a swanky car that has taken the market by storm, a personal loan can help you with that.
It is not for nothing that a personal loan is often referred to as an “all-rounder”.
2. No collateral required
Unlike many other loans, a personal loan does not guarantee that you will pledge an asset (personal or business) as collateral in order for you to be eligible for it. A personal loan is convenient financing for different needs due to its simple eligibility criteria and its simple requirements.
3. Appropriate loan amount
There is no hard and fast limit to the amount you can withdraw. Essentially, this means that if you meet the eligibility requirements and guarantee the bank that you are repayable, you can apply for and claim the loan amount you want to meet your obligations.
4. Fast approval process
Banks have started speeding up the personal loan approval process. It follows that if you fill out all the documents and adhere to the bank’s approval parameters, you can get the loan in less than a day. This advantage of a personal loan is particularly noticeable in difficult times when it is all about quick and uncomplicated finances.
Generally, a personal loan has higher interest rates for the simple reason that you don’t have to put your wealth at risk. This can make repaying the loan problematic if you do not have sufficient funds.
2. Strict approval parameters
The strict eligibility criteria also depend on the fact that a personal loan is usually unsecured. Banks usually check a reasonable monthly income before approving your application. Plus, your creditworthiness also plays an important factor, with a below par score can affect your chances of getting the loan amount you want.
3. Rigidity in repayment
While there is an option to choose a flexible repayment period, banks are not overly lenient with your manipulation of that schedule. This means that the prepayment or partial payment is almost completely eliminated – so you would have to hold on to the repayment over the entire term of the loan.
Undoubtedly, a personal loan is a convenient form of financing for you to meet a number of obligations. But the only requirement here is that you keep these pros and cons in mind before choosing one, so that financial freedom meets prudence.
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This content was created in collaboration with YONO SBI. created.