What is a Personal Loan?

A personal loan is an amount of money that an individual can borrow to meet his/her immediate financial needs. In layman’s words, a loan can cover several personal expenses. A personal loan is different from other loans for example home loans, car loans, education loans, etc. these loans are used for some specific reason like education loans for students who want to pursue higher education whereas home loans are for those who want to their own dream houses. A personal loan is for any current expenses like for your wedding, to clear other debts or maybe for your house renovation etc.

Personal Loan – Overview

A personal loan is easy to take, you can find the personal loan through banks, online lenders, credit unions, and many other sources and you can re-pay those funds over time with the particular interest.

The loan may be secured or may be an unsecured loan. Here secured loan requires some type of collateral or condition of borrowing that is if you default on the loan, the lender could keep your collateral to satisfy the debt, and if you failed the lender can claim it from your assets.

On the other hand, unsecured personal loans don’t require collateral to borrow money. As it’s not collateral the interest rates are very high. 

Benefits of Personal Loan:

Let us know how a personal loan helps in cost. The annual percentage rate (APR) on a personal loan represents the annualized cost of repaying the loan based on fees and interest rate, it’s about how much you pay in interest total over the life of the loan. For example, Mr. Brake gets Rs10,000 as a personal loan for his new burger shop at the rate of 6.0% and he has to repay the loan in 24 months which is 2 years. Mr. Brake has to pay Rs 600 per year and Rs 50 per month.

Whenever you decided to take a personal loan make sure of some important points and compare different banks and firms:

1. Borrowing limit 
2. Interest rate on the loan
3. Fees
4. Collateral requirement

What are the Purposes of Taking a Personal Loan?

As we know that a personal loan is a money borrowed for large purchases, debt consolation, emergency expenses, etc. In some cases, the person needs to pay some expenses in a quick phase like other existing debts, this debt can be your student loan, credit card debt, etc.

The loan is also taken for an investment purpose some of the users take the loan and invest in shares and starts ups or for starting a new venture.

When it comes to loans or credit it’s important to know your credit score and if you do not have a good credit score then a personal loan may help you to get one. Paying a loan on time will eventually raise your score and allow you to apply for a larger amount in the future. 

In this era, we never know when anyone can suffer from any emergency medical problem and how much expenses we have to ware. Certain diseases and treatments that may need to undergo are not always covered by insurance policies and medical policy clauses may even require you to pay a certain amount out of your pocket in those cases a personal loan can help you.

One can take a personal loan for travel and can pay the loan back afterward in small deposits. There is N number of reasons to take a personal loan and it can help one to make their desire into reality and can help in difficult times.