When should you apply for what kind of personal loan? Find out

By: |
October 19, 2021 3:58 PM

The prominence of personal loans is on the rise as they are safe and available at low interest rates. As per reports, the overall personal loans portfolio grew 2.3X in terms of originations by value and 3.8X in terms of volume.

Financial institutions will check for credibility with CIBIL, Equifax or Experian, before sanctioning the loan.Financial institutions will check for credibility with CIBIL, Equifax or Experian, before sanctioning the loan.

Personal loans are a convenient financing tool to address any urgent capital requirements. They provide borrowers with a one-time cash payment which they can repay with interest in monthly instalments over the loan’s term.

Madhusudan Ekambaram, Co-Founder and CEO, KreditBee and Co-Founder, FACE, says, “The prominence of personal loans is on the rise as they are safe and available at low-interest rates. As per a report titled ‘How India Lends-FY 2021’, the overall personal loans portfolio grew 2.3X in terms of originations by value and 3.8X in terms of volume.”

“The growth can also be attributed to the effective integration of technology, which has enabled individuals to gain approvals on their loans almost instantaneously,” he adds.

It is, therefore, essential to be clear about a few fundamentals while opting for a personal loan:

Different types of personal loans for varied capital needs:

  • Medical Loan: Medical care can be highly expensive, especially for serious conditions that require extensive treatment and prolonged hospitalization. In many cases, health insurance will cover these costs, but there are times when the charges exceed the policy’s coverage. In this case, Ekambaram says, “one can opt for a personal loan to cover medical expenses. Most fintech lenders provide streamlined methods for quickly disbursing funds, allowing you to deal with emergencies.”
  • Wedding Loan: Weddings can be an expensive affair, especially in India, where most people prefer a lavish celebration. However, with an online personal loan, one can simply cover all wedding-related expenses.
  • Education Loan: By taking out a personal loan, one can easily cover the costs of pursuing higher education. Ekambaram says, “These loans also allow for EMI repayment flexibility and can be used to pay for an advanced skill certification course.”
  • Home Renovation Loan: One can use a home improvement loan to fund renovations and repairs. These loans are frequently funded faster than other types of financing options.
  • Essentials/Unexpected expense: If one needs a quick influx of cash to pay for necessary expenses, a personal loan may be a good option.

Additionally, experts say, while availing a personal loan, one needs to maintain a good credit history as it determines the borrower’s creditworthiness. Borrowers should also compare interest rates while taking out a personal loan, and make sure to receive the best deal possible.

Ekambaram adds, “If used wisely, a personal loan can provide financial relief. To avoid pitfalls, learn everything there is to know about the personal loan process. The main message is that one should plan, prepare, and evaluate all options with a clear mind to maximize their financial success.”

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