When are personal loans a good idea?

Almost all of us need a loan at some point of time. The purpose can vary from meeting miscellaneous expenses to financing new plans like buying a vehicle, refurbishing home, or a trip abroad. Or any emergency. The only other options that people have in these cases is to deplete their savings, but it’s not at all recommended as savings are supposed to be kept untouched for any future uncertainties that may arise. Personal loan is a really good idea to meet overhead expenses without dipping into savings or deferring on the planned investments. What makes pre approved personal loans appealing is that it isn’t based on any collateral, but just your past credit record and ability to repay the loan.

When to apply for a personal loan?

  • If you are not eligible for a low-interest credit card, or have a credit card with low limits, then seeking a personal loan is the way out for you when you are in need of money.
  • For those without any significant collateral also, personal loan is a good option.
  • Personal loan is also availed to pay an existing debt, or if you need cash liquidity at a short interval.

Here are the scenarios that make personal loans a good idea:

No collateral

Unlike any other loan, the only criterion for availing personal loan is the credit track record or CIBIL score. If you are a valued customer of the bank, you can avail personal loan smoothly without a time-consuming process. Documents required for personal loan are minimal. While banks look for CIBIL score while granting personal loan, it doesn’t mean that it’s barred to those with low CIBIL scores. With so many lenders in the market and fierce competition, even customers with low CIBIL scores can avail personal loan, just that they will have to pay a higher interest rate. So, when you don’t have any collateral, personal loan is a good option.

Credit Card debt

If you have a high pending balance on a credit card that charges a high interest rate, then seeking a personal loan to settle that debt will save you money, as with a personal loan you will pay the pending amount at one go, rather than in EMIs. So even if personal rate interest is marginally higher than the credit card interest rate, you will save money because you will pay the entire sum in a short duration.

Big Life decisions

For big life decisions like home-buying, a new car, wedding ceremony, or an anniversary, personal loan can be more affordable than paying EMIs through credit card over a long period. Personal loans can also be better in case you already have a pre-existing loan.

Repaying Other Loans

While a personal loan is costlier than loan options like home loan, but it’s cheaper than certain other loans like payday loans. So, you can save a significant amount if you seek a personal loan to repay the old loan. However, do keep in consideration any penalty levied on an existing loan.

Improving CIBIL score

If you have a low CIBIL Score due to untimely past payments and you want to improve it for future, then seeking a pre-approved personal loan when you need it and its timely repayment can be a win-win situation for you. However, keep in mind that the score will fall further if you fail to pay the personal loan on time.

Conclusion: In situations when you need a large amount of money at a short notice, or want to repay an existing loan at the earliest, then a personal loan comes handy. A personal loan provides you the much-needed amount without the need to disturb your savings. If you are about to take a big decision in your life and are looking for a pre-approved personal loan, then Finserv MARKETS has some attractive offers at most competitive interest rates.