Right Reasons to Apply for a Personal Loan

Right Reasons to Apply for a Personal Loan

Right Reasons to Apply for a Personal Loan

Personal Loans are a good option during an emergency cash crunch and can be taken for a variety of purposes such as- consolidating your debt or paying for a major life event or a medical emergency. The reasons can be any but since they are unsecured loans it is important to remember that the interest charged is high. This means that the lender does not require collateral – like a property or a car, for example – to borrow money.  Since the lender is taking a greater risk it is likely that the interest rate will be higher than a secured loan. MyShubhLife offers unsecured personal loans at reasonable interest rates. Check out our website or download the app MyShubhLife. 

Personal Loans vis-à-vis other financing options 

Like we mentioned before, personal loans are typically unsecured loans. This means that you do not have to offer the lender any collateral in order to borrow. A home loan or car loan on the other hand is a secured loan. This means if you fail to pay back the loan your home or car can be seized by the lender. 

Before approving an unsecured loan, the lender looks at your credit history and credit score to determine whether you qualify. While car or home loans are used for specific purposes, the personal loan can be used for anything you like so long as you fulfill the conditions in the loan agreement. 

Personal loans are given in a lump sum amount and the repayment works in the form of EMI’s (Equated Monthly Installments) for the duration of your loan tenure. As long as you pay your EMI’s regularly and on time you are not considered a defaulter with the lender and your credit score does not go down. 

Reasons to Apply for a Personal Loan

Personal loans typically run for a 12–36 month period. They are a good way to bridge the gap during times of a financial crunch. You may consider a personal loan when you have to borrow for a definite reason and for a short period of time. 

The following are some of the possible reasons why one could opt for a personal loan- 

  1. Consolidation of Debt – A good reason to take a personal loan is for consolidation of existing debts. If you owe a substantial amount in credit card debt or higher interest loans (for e.g. from a private loan provider) you can take a personal loan and pay off the other debts in one shot. You then only have one monthly installment to pay. 
  2. Medical Emergencies – A medical emergency never comes with a warning. For these situations a quick personal loan can be the best option to manage the financial crunch. It is one of the most common reasons among those to apply for a personal loan.
  3. Financing a Home Improvement – A personal loan can be a useful credit instrument if one needs to urgently renovate one’s home. Whether it is a leaking roof or a broken gate, it is a quick way of getting funds for this urgent requirement. 
  4. A Major Life Event – Whether it is a wedding or a funeral, it costs money. A personal loan is a less expensive option to finance either of these major life events. As important as these events are, you should consider cutting back as much as possible so that you are not in debt for years together. While these events may be important they are not revenue generating, so it’s important to keep the total amount we can afford while planning a budget.
  5. Higher Education Expenses – Investing in education is perhaps one of the best reasons to take a personal loan. A personal loan can be a good option to pay for your or your loved one’s higher education. With inflation on the rise, education has become expensive. While education loans are available, they are not easy to get and require collateral as well as a huge amount of documentation. A personal loan on the other hand is an easier and quicker option. 

While a personal loan is a useful tool in times of a financial emergency, it is important to also keep in mind several factors before applying. It is important to understand one’s budget and capacity to pay the EMI’s every month before taking on a loan. Additionally, make sure you have a purpose for the loan, whether you need funds for debt consolidation, home improvements, or another goal. 

Once you take out a personal loan, create a plan and make sure that you make required payments early or on time each month. By doing this you can improve your credit score while paying your loan off. 

Apply for a hassle free, quick personal loan by downloading the MyShubhLife app.

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