As we step into a new decade, the time has come upon us to learn of all the various financial instruments that are available in the market and how if we make the right choices, they can work in our favor. One such financial instrument every earning individual should learn about is personal loans and how exactly they work. Thus in today’s article, we will discuss what exactly personal loans are and their workings.
What Is a Personal Loan?
One of the first and most important aspects we need to be aware of is the meaning of a personal loan. In simple terms, a personal loan can be understood as a financial instrument through which you can borrow a certain amount of money, usually between ₹10,000 to ₹15,00,000, and repay it back via a flexible repayment plan.
While the concept of personal loans is not exactly new in India, it has been gaining significant traction in the past couple of years, mainly due to the fact that so many lenders now render this service. Along with this, personal loans in India arrive with a variety of different features that are often missing from traditional loans. Some of the most significant ones are as mentioned below:
- Instant Disbursal
One of the most highly favored features of a personal loan lies in its instant disbursal option. The problem with most traditional loans is the fact that they often take too long to get processed, and generally, from the day you apply for the loan, all the way to getting approved for it and receiving the money in your account, you have to suffer from a wait time of 1 to 4 business weeks. While superficially, this might look like a minor issue, the downside is that most individuals seek out loans at times where they need money urgently, and thus waiting so long for the loan to get approved is detrimental to the process. On the other hand, with personal loans, from the time you apply all the way to you receiving the money in your bank account, it hardly takes 24 to 48 business hours, thus making sure that you receive the money when you need it the most.
- Competitive Rates of Interest
The next advantage of personal loans lies in the fact that they arrive at highly competitive rates of interest. Most traditional loans in India start at an interest rate of 5%, which means that in the long run, you will be spending a significant amount of money via interest rates. On the other hand, there are personal loans in India that start at just a 1.13% rate of interest, which is the lowest in the market. This means that in the long run, not only will you be able to avail the benefits of a personal loan but also make sure that you don’t burn a hole in your pocket via the interest charges.
- Flexible Repayment Plan
If you have ever researched traditional loans in India, I am sure that you are well aware of the fact that most of them come with a strict repayment plan, which means that the lender will fix both the EMI amount as well as the date of repayment beforehand and you need to comply with these to avail the features of the loan.
On the other hand, most personal loans in India arrive with a flexible repayment plan, wherein the lender gives you the option of not only deciding the EMI amount you want to pay every month but also the date at which you want to make the payment. This feature not only allows you to better manage your finances but also makes sure that your financial burden is significantly less.
- Online Application
Last but not least, personal loans in India come with a completely online application process, which means that you can apply for the loan and avail of its features right from the comfort of your home, without ever needing to step out. Along with this, since the entire application process is online, you only need to provide the lender with soft copies of your required documents and not hardbound ones.
On the other hand, most traditional loans in India have completely offline or partially online processes, which means that you need to schedule a specific time either to meet with the lender and hand over physical copies of your documents. This is not only a time-intensive process but also increases the review time for the lender, which further delays the process.
How Do Personal Loans Work?
Now that you understand the meaning of a personal loan along with its advantages let us understand how a personal loan exactly works.
The process of applying for a personal loan and getting the loan amount to your bank account is quite simple and straightforward. Since the entire concept of personal loans is based on the idea that the borrower should get the money in their account when they need it the most, most personal loans are unsecured in nature, so that both the application as well as approval time is reduced by a significant amount.
Once you avail of a personal loan, the EMI payment in most cases will start from the same date of the next month, when the money arrives in your account. Along with this, you are also given the option of changing this date to a more convenient one, however, this can be done only a limited number of times. Additionally, as compared to traditional loans, which generally have variable rates of interest, any personal loan you take will have the same rate of interest throughout its tenure, thus making sure that you spend no more than the offer which was originally extended to you.
Ending Lines
By now, we hope that the concept of a personal loan is clear to you, along with the various intricacies of its workings. If you avail of a personal loan in India, not only can it make sure that you get through your financially challenging times, but also empower you with its wide range of features and benefits.
Now, all that remains is you going ahead and choosing a personal loan from your favorite lender. All the best.
