Personal loans are a convenient financing tool to meet any urgent capital need. They offer borrowers a one-time cash payment that they can repay with interest in monthly installments over the life of the loan.
Madhusudan Ekambaram, co-founder and CEO of KreditBee and co-founder of FACE, says: “The importance of personal loans is on the rise because they are secure and available at low interest rates. According to a report titled “How India is Ready for Fiscal Year 2021,” the overall personal loan portfolio grew 2.3 times in terms of creations in value and 3.8 times in terms of volume. “
“The growth can also be attributed to the efficient integration of technology, which has enabled individuals to obtain approvals on their loans almost instantly,” he adds.
It is therefore essential to be clear on a few fundamentals before opting for a personal loan:
Different types of personal loans for various capital needs:
- Medical loan: Medical care can be very expensive, especially for serious conditions that require intensive treatment and prolonged hospitalization. In many cases, Medicare will cover these costs, but there are times when the costs exceed the coverage of the policy. In this case, explains Ekambaram, “you can opt for a personal loan to cover medical costs. Most fintech lenders offer simplified methods of disbursing funds quickly, allowing you to deal with emergencies.
- Marriage 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 the expenses related to the marriage.
- Student loan: By taking out a personal loan, one can easily cover the costs of pursuing higher education. Ekambaram said, “These loans also allow EMI repayment flexibility and can be used to pay for an advanced skills certification course.”
- Home renovation loan: One can use a home improvement loan to finance renovations and repairs. These loans are often funded faster than other types of funding options.
- Essentials / Unexpected Expenses: If one needs a quick influx of money to pay for necessary expenses, a personal loan can be a good option.
In addition, according to experts, while taking advantage of a personal loan, one must maintain a good credit history as it determines the creditworthiness of the borrower. Borrowers should also compare interest rates when taking out a personal loan and make sure they are getting the best deal possible.
Ekambaram adds, “If used wisely, a personal loan can provide financial relief. To avoid the pitfalls, learn all about the personal loan process. The main message is to plan, prepare and evaluate all options with a clear mind to maximize their financial success.