It is not a secret that it is almost impossible to get an unsecured loan nowadays. But, there are still lenders who offer this type of financial help. Thus, this loan is a very convenient way to receive quick cash, and it can use for various purposes. If you need some extra money, the first thing that rings in mind is a personal loan.
So, you want to know the benefits of personal loans and their impact on your life.
Hold your seat, and let start with the basics.
What is a personal loan?
Personal loans are unsecured loans which means you do not need to deposit any collateral in the bank for security as other loans. In the case of home loan equity, you need to deposit home assets as a mortgage and, similar in the case of gold. Personal loan design for people who need financial help in a short time. It takes a much short time for approval that varies from bank to bank. The need for documents is also the least for approval of the loan.
How does a personal loan work?
A borrower can apply for a personal loan from a reputable bank or other non-bank lending firms in their country. Agreement based on the terms and conditions, the loan amount is approved by the lender. The borrower will receive a one-time lump sum corresponding to the borrower’s amount. Depending on the agreed repayment terms, a certain amount is determined to fix as a monthly payment. That will be paying for a fixed duration of months until the borrowed amount included in the interest charged to the loan amount is payback.
Benefits of a personal loan
01. Has a shorter tenure for repayment.
In everyone’s life, it happens that you need money in a short time but also don’t want to repay the loan for a long time. Then, a personal loan comes to your mind because this loan has a much shorter term or tenure than another loan. While the average loan term usually runs from ten to thirty years, personal loan approval for a period of between one and five years. Hence, this loan can be beneficial for you.
02. You get instant approval
You want to get instant approval of your loan. Then the personal loan is a type of loan for which you get instant approval. It can usually take 30 minutes to 24 hours which depends on the bank. So, you did not wait a long time to approve your loan as another loan like a home equity loan and gold loan.
That is the great advantage of a personal loan.
03. Unsecured loan
You do not want to pledge your collateral against the amount you borrow in banks. Because you know that if your loan defaults, you will not be able to recover your collateral. But in the case of a personal loan, you are not required to deposit any collateral or security deposit against the amount borrowed. That gives you personal satisfaction against your assets. This feature attracts toward the personal loan.
04. Least document required for approval of personal loan
Almost all banks provide a personal loan with minimal documents, such as a bank statement, tax return, income proof, etc., and this documentation list below. You will get the information of all these documents below. Every bank has its own terms and conditions that follow the guidelines of its own banker’s bank. So you must know all the terms and conditions carefully before applying.
05. Useful to tackle an Emergency
An unexpected event or emergency can happen to anyone’s life. Such is a time when depending on your financial status or circumstance. You may or may not be financially prepared to address the emergency. A lot of people are getting stuck in such a swamp. It often leads to seeking financial help from banks or lending institutions through a suitable type of loan. In this situation, personal loans help to come out from these swamps and become beneficial for you.
06. Use for multiple reasons
- If you are a business owner and the economic recession has somehow affected your business. What are the options available to keep your business afloat?. Most business owners who are not access funding from banks and financial institutions due to the recession. They are taking advantage of their capabilities. And personal situation to gain extra capitalization through personal loans.
- You are planning a vacation or an expensive wedding event. If you do not afford these costly events, this loan is the easiest way to help you financially. Thus, a personal loan allows you to choose the loan amount that meets your necessity during these events.
- A personal loan is a great help when you need high education, tackle a medical emergency, or plan an expensive like dream wedding. You also claim a personal loan interest rate deduction based on the purpose of the loan.
07. Tax is not applicable on personal loan
A personal loan amount that you raise is not a part of your income. Which means you would not pay any income tax on the loan amount. And that can be applied when you take a loan from a bank or reorganize NBFCs. If you take a loan from other sources like family members, it considers a part of your income and eligible for a tax deduction. The income tax offers a tax deduction on loans which catered to use for specific purposes.
08. Debt Consolidation Loan
You can overpower your debt by applying for a personal loan which you can use to consolidate your debts and other existing yet unpaid loans. And also, you can consolidate all debts or loans that charge a high-interest rate into one debt – through a personal loan. You can approach a bank in any country and apply for a debt consolidation loan. After submitting and complying with all the requirements, you get approved for a certain amount, equal to the amount you need to settle all your other loans. The loan attained from the personal loan will use to pay up all the combined. And total outstanding balances of the many loans you have before taken out for other purposes.
09. Paying for Only One Loan
This arrangement will allow you to worry about paying one loan, and that is the debt consolidation personal loan. And since the other loans have already settled, there are fewer repayments to worry about it. Besides, you are building a good credit history by confirming the high-interest debts.
10. Flexible Repayment Terms
If you have a good credit rating or bank statement history, the bank will not have any issue allowing you a longer repayment period for your loan. You should also check their restrictions on the early repayment of the loan. Some allow it but with corresponding penalties or service charges.
How Quick Can A Person Get Approved For A Personal Loan?
When you reach a situation where you need extra cash to fund something which can no longer be incapable of your income or budget, what is an option for you?. You turn to the banks or financial institutions in your local areas to take out a personal loan. Each bank and lending firm has its own set of requirements and policies on personal loans.
Some banks offer personal loans that are secure with collateral. Borrowers who can pledge a security against the loan will have a higher chance of getting loan approval faster than those without collateral.
Some banks offer personal loans without any security or collateral. Borrowers are appraisals based on their financial circumstances or their financial capability to repay the borrowed money. That might take longer as the bank may require documentary proof of the borrower’s financial capacity.
But other non-bank lending firms are more flexible with their application process. And offer online loan application submission. Borrowers spend 15 minutes filling out an online application form, providing the lending firm with their personal information and financial details. They even have an online loan calculator so that the borrower can determine how much he can borrow. What the repayment amount will be, and how long they must repay the loan.
Compared to traditional banks, non-bank lending firms offer a quicker application process. They inform the borrower of the criteria for qualifying for a personal loan, such as:
- Must be over 18/21 years of age
- Must be a permanent resident of your country
- Must be currently working and receiving a yearly gross income.
- Must not have had any defaults on loans or credit cards in the last five years
- Must not have filed for bankruptcy in the since seven years
They also specify the different documents and information. They have to provide for their application to process, including:
- Your email address
- Your driver’s license (if you have one)
- Your details of employment
- Any outstanding loan or credit card balance (including limits and repayments)
- Details of living expenses, for example, mortgage repayment, rent, monthly recurring bills, car loan repayment, etc.
Additionally, non-bank lending firms may need submission of the following evidentiary documents:
- Proof of residency
- Proof of income
- Proof of employment
When all of these are complied with and submitted electronically to the lending firm, processing can be as quick as one day.
Upon approval of the loan application, funds will transfer to the borrower’s account on the same day or the following day at the latest.
A personal loan has a predetermined fixed repayment amount and schedule. The repayment amount includes the interest charged on the borrowed amount. So, most people do not get hassle at the time of repayment. A personal loan is a way to get out of the quagmire of debt if you already have a high-interest rate of debts. This loan is beneficial for everyone if they want to spend an expensive in a short time. But do not recommend depending financially on this type of loan. Thus, every advantage has a disadvantage. How to get a personal loan without any hassle? Please leave your comment below.