What are the benefits offered by a personal loan?

Are you facing a money crunch? Applying for a personal loan from any lender or through Paysense might be a good option. Whether it is a home renovation expense, travel expense or marriage expense, a personal loan is an ideal option to opt for to meet your financial requirements. With zero collateral or security, quick loan disbursement, the documentations involved to avail a personal loan is far less in comparison to other loan types like a car loan, education loan or home loan. Moreover, the loan amount offered under personal loans ranges between Rs.1000 and Rs.40 lakhs. Listed below are the benefits offered by personal loan if you avail it through Paysense or any other lender:

* Multipurpose loan:

The most important advantage of a personal loan is that, unlike education loans, home loans or car loans, it can be used for any cause. There is no restriction put on the end usage of personal loan proceeds. This loan type is categorised as one of the easiest ways to avail cash to meet urgent situations.

* Available at lower personal loan interest rates:

Many incorrectly believe that personal loans available through any lender may it be Paysense, or SBI will be massively expensive. But note that it is only applicable to those with poor credit scores of below 750. Some of the lenders provide personal loan interest rates starting at just 8.90% p.a. to those with excellent credit scores. Such personal loan interest rates cannot be entitled to be high as a personal loan as a credit option is not backed by any security, collateral or margin as in the case of secured credit options such as loans against securities, gold loans etc. Unsecured credit options such as loans against credit cards and credit card EMIs have a higher rate of interest when compared to personal loans for loan applicants with similar credit profiles.  

* No collateral or security:

In case of a personal loan availed through Paysense or any other lender, you do not require to pledge or provide any collateral or security to avail personal loan.

* Quick disbursal:

If you fulfil the eligibility criteria and carry a good credit score of 750 and above, you can avail of a personal loan within a day. Moreover, few financial institutions like Paysense provide pre-approved facilities to the existing customers.

* Hassle-free documentation: 

Taking a personal loan to require minimum documents. You are only required to submit your latest salary slip, last three months bank statement and KYC documents. Existing pre-approved customers are not required to submit any documents.

* Floating interest rates:

Most of the banks and NBFCs offer personal loans at a floating rate of interest to the salaried individuals working with top-class corporates. Therefore, the monthly instalments changes as per the changes in the market for the whole loan tenure. At present, the trajectory of personal loan floating interest rate is at an all-time low. Note that floating interest rates are those, which are sanctioned by banks or NBFCs. Linked directly to external benchmarks such as T bills, repo rates etc. Thus, any reduction in the rate of interest in personal loans in future would be passed. The personal loan borrowers from banks instantly in case of floating interest rates. 

* Flexible repayment tenure:

The repayment tenure for a personal loan is flexible as it ranges anywhere between 3 months and 84 months. Therefore, you can simply choose your tenure depending upon your repayment capacity. You can evaluate your repayment capacity by deducting your mandatory monthly expenditures like SIP contributions, insurance premiums, existing EMIs etc., from your month on monthly income. Most of the lender generally prefer your overall EMI, involving your personal loan EMI to be within 50 to 60 % of your gross monthly income or net monthly income. Once you are aware of your EMI repayment capacity, choose the shortest repayment tenure according to your affordability because this would reduce your interest cost. However, in this process, avoid compromising your monthly contribution required for acquiring your crucial financial goals as doing so would negatively affect your financial health in future. 

* Tax benefits:

Personal loan generates tax benefits on the basis of its end-use. If you utilise the loan for renovation and construction work or for making a down payment for your home. You can get a tax deduction of up to Rs.2 lacs under section 24B. Also, you can avail of tax benefits if you utilise a personal loan for business. Subject to your potential to provide sufficient documents to show that the amount has been used for this purpose.

Bottom line

A personal loan is a real friend offering flexible features. Such credit options require minimal documentation. No security and are processed fast with putting no restriction on the usage of the loan proceeds. Their quick availability with the ease to use the loan proceeds for any purpose makes them. The best financial option for fulfilling one’s financial needs or fund shortages in case of emergency. Urgency or requirement.  However, the feature of no security categorises personal loans into unsecured credit options. Which makes lenders adopt a cautious approach in the course of the personal loan approval process.

Paysense or other lenders, while evaluating the personal loan application of the applicant, first ensure to check the applicant’s credit score to understand their credibility. Generally, applicants with a score of 750 and above have higher chances of getting their application for a personal loan approved as compared to others with a lower score of below 750. Those with low credit scores either get rejected for a personal loan or are given the approval at much higher personal loan interest rates than those with good credit scores to compensate for the credit risk involvement.

Note that getting a personal loan is generally easier for borrowers with sound employment history and good credit scores. What makes this loan type more captivating today is the choice to compare. Apply and get the loan via online marketplaces or aggregators. Which help to bring apt deals to you on a platter.