When you think of the different types of loans that people opt for, you will notice that a large percentage of people prefer to take an unsecured loan where they do not have to provide any collateral but can get a loan based on their credit history.
Among the different types of unsecured loans, the scales tip in favor of an unsecured personal loan. There are many reasons for taking an unsecured personal loan. People choose these for the benefits that they can get. People can apply for this loan for various purposes like medical emergency, home renovation, paying tuition fees or rent, wedding, vacation, travel, and a lot more.
Purpose of an Unsecured Personal Loan
When people are faced with a situation where they need financial assistance, they turn to financial institutions. The needs could be varied and might include medical emergencies, a wedding in the family, higher education, or it may even be just for a vacation.
- There are situations when you are not in a position to meet the cost of an unexpected event. There are no immediate sources of funds available to tide you over, and this seems like the only option.
- Then, there are also situations when you want to spend some money on an activity of your choice but do not want to disturb your savings. In such circumstances, you may prefer to take a lump sum as a loan and pay it back in smaller installments.
Unsecured Personal Loans – Benefits
The benefits of unsecured personal loans are many and cover various aspects of the process of taking a loan. Some of the key benefits are:
- The Eligibility Criteria Are Simple
As long as you fall in the age-band of an earning adult, have the minimum required monthly income and a good credit score, you can apply for the loan with high chances of approval. You only need to provide documents verifying your identity and financial status.
- You Do Not Need Any Collateral
An unsecured loan is processed based on your credit score and your capability of repaying the loan. You do not need to deposit any assets in exchange for the loan. It works in favor of the borrower as well as the lender because of the reduced paperwork. It also speeds up the processing of the loan, and the money can be disbursed quickly.
- You Can Avail Flexi Loan
Under this facility, you can choose to take your sanctioned loan amount in parts to facilitate payments for different needs at different times. It saves you from paying interest on the amount that you have not utilized until you do. Also, you can pay the loan before maturity if you have the funds to do so. It does not attract any penalty.
- The Tenure Is Flexible
Under a personal loan, the borrowers are provided with a full window for the repayment of the loan. They can choose from a period of 12 to 60 months to make the final payment of the loan.
- The Interest Rates Are Low
Unsecured personal loans can be taken at a meager interest rate. These would depend on the amount of loan taken and the tenure chosen by the applicant. With a flexible loan, you can also choose to pay interest-only EMIs and pay up the principal at the end of the tenure. Always compare the personal loan interest rate of different lenders before availing for the loan.
A personal loan, that too, an unsecured one can be a blessing in disguise for people as it saves them from the stress of paying large sums of money from their savings and disturbing their investments. They can get expensive medical treatments, enjoy vacations, and celebrate weddings, among other things without spending significant amounts from their pockets. Paying for the expenses a little at a time is a luxury when the costs are high.