A personal loan is a type of unsecured loan given to the customers so that they can fulfill their requirements. Unlike house loan and auto loan, a personal loan can be used for any purpose you see fit. For instance, you can buy home appliances or pay medical bills or visit your dream destination using the money. Personal loan is offered by both banks and non-banking organizations after verifying your ability to pay back the lender. Mainly your source of income and credit history is checked. A certain amount of processing fee is charged and the loan amount is credited to your account. Monthly installment is calculated based on the tenure and amount of the loan so that you can pay back comfortably. Before you apply for a personal loan, let’s take a look at the pros and cons.
- Easily available: Almost all banks and financial institutions offer personal loans at reasonable rates. Compared to other loans, it is easy to get a personal loan.
- Middleman not involved: Sometimes the loan application process is so complicated that customers get in touch with a middleman for loan approval. However, no agent or middleman is required for securing a personal loan. You can directly approach the bank or other financial organization to complete the process quickly.
- Unsecured loan: This is probably the biggest advantage of the personal loan. No collateral is required in order to get a personal loan. The only thing that matters is your ability to pay back the money.
- Quick processing: Since there is no collateral or guarantee required for the approval of a personal loan, the processing time is very fast.
- Complete freedom: It is not mandatory to specify the cause for which the money will be utilized. The lender is simply not interested to know whether you are going to spend the money for your wedding or buy home appliances.
- Easy payment schedule: Depending on the amount you borrow, the loan tenure can be 12 months to 60 months long and all you need to do is pay a fixed EMI every month till the total amount including accumulated interest is paid.
- Strict qualification criteria: It is true that the processing time of a personal loan is less than other types of loans, but only if you qualify for the loan as per the guidelines mentioned by the bank. The guidelines vary from one lender to another and since it is an unsecured loan, banks and other financial organizations follow very strict guidelines.
- Bank account is mandatory: You must have a bank account to avail a personal loan. It is not mandatory to have the account in the same bank where you are applying for the loan.
- Credit history will be checked: It is difficult to get a personal loan without a good credit history. Since the lender is giving you the money without any collateral, he will check your past records to make sure that you will pay back on time. It is wise to apply for the personal loan in a bank where you have an account and share a good relationship with the manager.
Like every other type of loan, a personal loan has some pros and cons, but as you can see, the pros simply outweigh cons. You should do some research while applying for a personal loan so that you get the best interest rate from a trustworthy lender.