Is It a Good Idea To Get a Personal Loan?

Dec 5th 2023
Loan
Is It a Good Idea To Get a Personal Loan?

Is It A Good Idea to Get A Personal Loan, If your credit score is high and your income is steady, getting a personal loan makes sense because you'll be eligible for a low-interest rate. On the other hand, you will be offered a higher interest rate if you have a low credit score and unsteady employment. Applying for a personal loan every time you have a significant bill is not advised. A personal loan might help you stretch out the cost over time if you have an unforeseen need, like medical bills or auto repairs. This can help you stay out of debt and manage your budget more easily.

When You Should Get A Personal Loan?

There are several reasons why you could take out a personal loan, such as financing your wedding or repaying previous debt. Income is the primary criterion used by banks to approve personal loans; the purpose is rarely taken into account. You can be eligible for a personal loan for the following reasons:

  • Consolidate your debts: You may be able to obtain a personal loan if you have a lot of loans that you would like to pay off or if you have used up all of your credit card limits. Ideally, you ought to wait to take this action until after both your salary and credit score have increased. If not, it might not be a good idea.
  • Refinance your education: Personal loans are the best option when it comes to financing education. Loans for education provide several advantages and interest rates that are significantly cheaper. Nonetheless, to cover any unforeseen costs, you have the option to apply for a personal loan.
  • Remodel your house: If you want to make improvements to your house, you can be able to receive a personal loan. Your house could become cosier and provide you with much-needed peace of mind after the renovations. Additionally, if you want to sell your house soon, the renovations can increase its worth.
  • Affordably: Indian weddings are notably costly events. Even though you might be tempted to make every purchase with your credit card, it's preferable to apply for a personal loan. In this manner, you will finally be able to pay back the debt.
  • Finance a purchase: If you want to buy furnishings for your home or take a vacation on your own, you may finance it by applying for a personal loan. You can take a personal loan if you currently don't have enough savings to cover the cost of your buy.
  • Medical emergency: If you or a family member has been diagnosed with a serious disease or requires surgery very away, you may be eligible for a personal loan to cover the costs. Although you may always obtain a personal loan, it is advisable to have health insurance for you and your family to be covered in the event of an emergency.

When You Shouldn't Get A Personal Loan?

Getting a personal loan is not too difficult. A personal loan application can be submitted, and funds can be disbursed in as little as one week. When you ask for a loan, though, you should be certain that you truly need it. The following are some explanations for not obtaining a personal loan:

  • Random decision: When faced with a significant expense, it's best to postpone enjoying it right now and instead save money for it gradually. You will be able to afford the identical thing in six months if you avoid interest and instalment payments.
  • Inefficient use of money: Before obtaining a personal loan, think about whether the expense will help you in any concrete way. Don't take on debt unless it will improve your life in some way.
  • Bad credit: Avoid applying for a personal loan if you have a low credit score because you could pay extremely high interest rates. Further damage to your credit score will result from your inability to repay the loan. Take out a new loan if needed, but first, pay back all of your current debts.
  • Unstable job: The availability of personal loans is typically dependent on your income. Most likely, banks will charge you a high interest rate if you don't have steady work. Thus, consider your options carefully before deciding to take out a personal loan.

Read More: Tax Benefit on Personal Loan: How to Avail Tax Benefits?

Personal Loan - Advantages And Disadvantages

As every coin has two sides, Personal Loan also has two sides, the following are mentioned with advantages and disadvantages.

Advantages Of Personal Loans

  • Versatile Use of Funds: Personal loans can be taken out for several reasons, including debt consolidation, home improvement financing, unforeseen bills, and paying for schooling or healthcare.
  • Fixed Interest Rates: Most personal loans offer fixed interest rates, which make budgeting easier because your monthly payments won't fluctuate throughout the loan.
  • No Collateral Needed: Since personal loans are frequently unsecured, you are not obliged to pledge assets as security for the loan, such as your home or vehicle.
  • Generally speedy approval process: Personal loans frequently have a quicker approval process than other loan kinds, enabling you to get funds right away.
  • Potential Credit Score Improvement: Paying back your loan on time will raise your credit score, which will help you get approved for loans at cheaper interest rates in the future.

Disadvantages Of Personal Loans

  • High-Interest Rates: The interest rates on personal loans can vary depending on several factors, including the lender, the loan size, and credit score. However, generally speaking, they might exceed those linked to secured loans, such as home equity loans.
  • Regular Payments Could Be a Burden: You should be sure you can afford the monthly payments on your loan without going over your monthly spending limit, as these payments might be significant.
  • Accumulation of Debt Risk: Obtaining a personal loan may result in a higher total debt load, which may make it more difficult to pay off subsequent debt or save money for goals.
  • Potential Fees: If a lender adds origination fees, prepayment penalties, or other loan-related expenses, the overall cost of a personal loan may increase.
  • Impact on Credit Score: Missing payments on your loan could negatively impact your credit score, which could make it more challenging for you to be authorized for a loan in the future.

Thus, personal loans come with a set of benefits and drawbacks that vary depending on several variables like your salary, credit history, and the amount you want to apply for. Even while getting a personal loan now could be a smart move, in the future that could not be the case. Plan accordingly before applying for a loan.

Therefore, there are a variety of advantages and disadvantages associated with personal loans, contingent upon factors such as your income, credit history, and the loan amount you wish to apply for. In the long run, however, it may not be a wise decision to take out a personal loan now.

Overall Benefits Of Getting The Personal Loan From Investkraft

1. Hassle-free documentation

One of the most significant Personal Loan benefits is minimal documentation. If you apply online at Investkraft, our documentation is entirely digital. You can upload the required documents along with your application form. The process is entirely paperless. For the process, we suggest you to submit proof of age, address, bank account details, salary slips, income tax returns, credit history, etc.

2. Quick disbursal

The disbursal of a home loan takes around 3 to 4 weeks. On the other hand, a Personal Loan requires only 24 hours to 72 hours. Thus, they are the best financial product for meeting urgent cash or payment requirements. However, you must meet the eligibility criteria at Investkraft and have a good credit score to get your loan disbursed quickly.

3. No collateral required

Personal loans are unsecured loans. Thus, you do not need to provide any collateral as security for default or non-payment of dues at your end. This feature of Investkraft’s Personal Loans makes them accessible to everyone with a regular source of income and a good credit history.

4. Build credit score

Affordable Personal Loans at Investkraft are a great way to build your credit score, especially if you are new to credit or have a low credit score. You can avail of them at attractive interest rates and repay them over a flexible loan tenure. As you pay your EMIs and interest on time, your credit score keeps improving. However, remember to avail of a loan within your repayment ability. If the loan EMI is unpayable and you miss any EMIs, it can negatively impact your credit score.

Read More: Personal Loan for Low CIBIL Score of 550

5. Flexible tenure

One of the Investkraft’s Personal Loan benefits attracting borrowers is a flexible repayment schedule. The tenure starts from 12 months and can go up to 7 years. Therefore, you can choose a tenure suitable to your finances and needs. A longer tenure means lower EMI. So, choose a tenure that lets you optimize your monthly outgo as per your needs.

6. Attractive rates of interest

Investkraft’s Personal loans are available at competitive interest rates. As a result, you can enjoy affordable EMIs. Generally, the rate of interest is fixed. So, your EMIs are also fixed for the entire loan term, and you have no worries about changing interest rates.

7. Tax benefits

Depending on the utilization of funds, you can claim tax-related exemptions on your Personal Loan. For instance, if you use the loan for home renovation, construction, or making a down payment for a house, you are eligible for tax deductions of up to Rs. 2 lakh under Section 24B for the interest paid during a financial year. However, different use cases are subject to additional terms and conditions. Submit the required documentation to understand how you can enjoy tax benefits on your Personal Loan. For best suitable personal loan, choose Investkraft.

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