Personal loans are unsecured loans that often carry a lower interest rate than credit cards. Being unsecured, personal loans do not come with the added burden of collateral. They are given by banks solely on the basis of the applicant’s credit history and repayment ability. Therefore, it is important that you maintain a good credit score and file taxes on time.
Personal loans are given to applicants without any questions. So, these can be used for any purpose. Here are a few various scenarios where you might be able to use money from a personal loan.
- Medical Emergencies
Medical emergencies come up at any time, and thus you need to be prepared. There are times when you don’t have adequate savings to meet your medical expenditure. You can land in this situation if you don’t have a good medical insurance. Personal loans are a good source of money to meet medical expenditure, as personal loans don’t require any kind of collateral.
- Higher Education
There are a lot of banks that offer educational loans. However, the downside of these loans is the high-interest rate charged on them. Banks also generally fund the education of the students of a few selected and prestigious institutions. Also, there are times when education loans just aren’t enough to cover tuition, relocation costs, living costs, etc. In such situations, personal loans prove to be very helpful. The personal loan amount can be used to cover living costs, relocation costs, etc. Personal loans don’t require collateral, and usually, carry a pretty low rate of interest.
In India, weddings are considered to be a big deal. A lot of people spend a lot of money on weddings. Big fat Indian weddings are considered to be a matter of pride. For this, not everyone may have enough money saved. Personal loans are a good way to fund your wedding, provided that you are getting a good interest rate. There are no loans termed as “wedding loans”, whereby people use personal loan money to fund weddings, too.
- Clearing a high-interest loan
Personal loan rates are generally higher than other loans, but time can change everything. Interest rates differ from time to time. There are times when you have to take a loan at a high rate of interest because you need the money. However, you can settle your earlier loan with a higher interest rate, using a personal loan. The key highlight here being the interest rate. This makes sense only if the personal loan has an interest rate that is lower than the earlier loan.
- Home Improvement
Personal loans can be taken for some home improvement projects depending upon the interest rate that you can afford. You can use this personal loan for home repair or for remodeling purpose. Such a personal loan used for home improvement will be like any other unsecured personal loan. The loan amount and the interest rate that you will be charged would depend on your creditworthiness.
The Bottom Line
There are times when one needs cash on an urgent basis. Not everyone has the savings for being able to match such emergencies. Taking a personal loan can help quite a lot if you’re smart enough.