Financial emergencies can disturb the alignment of the best financial budget you have created. In such a situation, a personal loan can prove to be helpful in meeting your immediate money requirement. Due to being unsecured, this loan is offered with many features including fewer documents, instant loan disbursal. Through this article, you will know what are the features that can make a personal loan a good option for you in a financial emergency.
No collateral needed
In a secured loan, you need to deposit collateral such as property, bonds, shares, etc. with the bank. In case of default or failure to repay the loan, the bank can recover its loss by selling that collateral. Whereas there is no such risk in unsecured personal loans. To take this loan, you do not need to deposit any collateral or security with the bank. This is the reason why the processing time of a personal loan is less than a secured loan. This is a good option for those who want to get an instant loan without any collateral or security.
Better than credit cards
There are many similarities between Loan Against Credit Card and Personal Loan as both of them are collateral free loans, you can use them to meet any of your financial needs and their loan processing time is also very short. But these loans are also different from each other to a great extent. Private banks usually offer personal loans at an interest rate of 10.49% per annum, while some public sector banks offer loans at even lower interest rates.
On the other hand, credit card interest rates on the outstanding balance usually start at 40% per annum and withdrawing cash from a credit card may have to pay charges such as interest rates as well as processing fees, so it is advisable not to withdraw cash from a credit card. While a personal loan has more time to repay (5 to 8 years), there is less time to pay credit card bills. For financial emergencies, credit cards should only be used by those who can pay their credit card bill on or before its due date.
Minimum Paper Work
There are very few documents required to take a personal loan. Many banks/NBFCs also offer pre-approved personal loans to their existing customers based on their credit profile. Personal loan is unsecured, so while taking this loan, fewer documents need to be submitted, including your ID proof, address proof, and income proof, etc. Applicants who apply for a pre-approved personal loan are given a personal loan by some lenders with little or no documentation. Because these offers are usually given to existing customers. In such cases, lenders already have the necessary KYC details of their customers such as PAN card, Aadhaar number, address, income proof, etc. Due to which the loan is available in a short time.
Flexible Loan Repayment
On a personal loan, you get a flexible loan repayment option. In this, you can choose a loan repayment tenure between 12 to 60 months as per your choice. Some banks offer an even longer repayment period: Just like State Bank of India (SBI) offers a repayment period of up to 6 years, Canara Bank Personal Loan can be repaid for a period of up to 7 years. With this, you can repay a personal loan in easy EMIs. Remember that not paying EMIs on time can affect your credit score. So choose the term based on your paying capacity. Taking a personal loan for a shorter loan tenure will increase your EMI, but lower the overall interest cost. While taking a personal loan for a longer loan tenure will reduce your EMI but increase the overall interest cost. So choose your loan tenure carefully.
Quick Loan Approval & Disbursal
At the time of financial emergency, there is a need for money immediately. Where regular personal loans may take a few days to be disbursed. At the same time, with the help of digital onboarding, many banks and NBFCs disburse loans in a few hours. Due to which borrowers can easily meet their immediate financial needs. If you apply for a pre-approved personal loan, the loan amount is transferred to your account immediately or within a few hours of the loan application. For example, HDFC Bank claims to offer personal loans to its customers in 10 seconds.