According to a report by TransUnion, the FinTech Revolution has accelerated the expansion of the Indian consumer credit market – namely, in the unsecured lending categories of credit cards, personal loans, and consumer durable loans. In terms of numbers, these categories grew by a whopping 31.8% in Q4 2018 – a figure that is bound to grow over the course of this year with the increasing prominence of various lines of credit.
According to Jason Laky, Senior Vice President and TransUnion’s consumer lending line of business leader claimed that “FinTech comapnies have helped make personal loans a credit product that is recognized as both a convenient and simple way to obtain funding online.”
Customer interest is at its very peak when it comes to the topic of personal loans. So, let’s talk about them.
How does a Personal Loan work?
The concept of a personal loan is not really all that complicated – in fact, one might argue that it’s one of the most simple and straightforward lines of credit that one can opt for. One applies for the amount that they require and submit the required documents. After this, the financial lender checks their creditworthiness and makes an offer that entails the amount and the interest rate.
If you have carefully assessed your repayment abilities and are still not sure whether to go ahead with a personal loan, here are 3 reasons why you should.
1. It is easier to manage than having multiple credit cards
It is not surprising why a single, fixed-rate personal loan is much easier to manage than relying on multiple credit cards with different spending limits, payment due dates, interest rates, issuer policies, and whatnot. In addition to availing lower interest rates than a credit card, one might be able to choose a monthly payment amount and term that better fits their current budget needs.
2. It can be used for anything
A personal loan can be used for most requirements. Medical expenses, debt consolidation, home renovation, car repairs, weddings, and even a vacation can be facilitated with a personal loan. The funds received through a personal loan can be utilised by the borrower for numerous functions, with little to no restrictions set from the lender’s end. However, this doesn’t justify an impulsive decision to simply go ahead and borrow. It is advisable to consider your spending limits and loan urgency before applying for a personal loan.
3. The repayment plan is predictable
Personal loan, apart from coming without the need for a security deposit, also comes with fixed interest rates, monthly payments, and repayment terms. Once the loan is approved, the borrower will learn precisely how much they will need to repay each month, their total interest cost over the life of the loan, and how many monthly repayments they need to make over the course of the loan tenure. This will help them assess their repayment abilities effectively.
Some Frequently Asked Questions
What is the eligibility criteria?
Although the eligibility criteria may vary for different NBFCs and banks, the general eligibility is more or less the same. One must have a stable source of income, regardless of whether they’re salaried or self-employed. Other determinants include age, occupation, credit history, and repayment ability.
How loan does the disbursal of loan amount take?
This depends from one financial institution to another. Generally, it takes 7 working days for most lenders to disburse the required amount. However, at Clix Capital, we aim to make the wait as short as possible and disburse the amount within 48 hours.
Should you go for the lowest possible EMI when choosing a loan provider?
A low EMI usually stems from a loan repayment plan, a low-interest rate, or a combination of the two factors. Sometimes, you may end up paying a high rate of interest to the lender if you choose low EMIs. Using online tools like personal loan EMI calculator to gauge your interest payout over the loan tenure and repayment capacity before taking the final call would be advisable.
Can you apply jointly with your spouse?
Yes, one can apply for a personal loan either by themselves or with a co-applicant. Having a co-applicant means that your loan application will be processed with a higher income bracket, which will make you eligible for a larger loan amount. However, you should also keep in mind that if the co-applicant has a poor credit history, the chances of success of your loan application might be low.
Lastly, Remember To…
Budget your money: It will be beneficial to provide the financial lender with your monthly spending plan. It will help them make a responsible decision – both for themselves and for you.
Beware of the tagline ‘Now or Never’ or similar offers: If a deal is truly good, it will probably stay there after you’ve had enough time to think about it. Don’t be pressured into making a short-sighted decision.
Ask questions: Don’t be afraid to ask as many questions as you want to and don’t sign on the line until you’re satisfied with each answer.
Read the contract: Don’t sign a contract that you don’t fully understand or that contains any blanks. A signed contract with blanks can be completed by anyone and it will be legally binding.
Make timely and complete payments: This is an excellent way to build a good credit history. Continuous late payments can trigger late payment fees and hurt your credit report as well. This will make it difficult for you to avail loans in the future.
A personal loan can be a highly useful tool in the right situation. Make sure that you weigh all your options and ask yourself if you really require a loan before going ahead with it. Once you decide that you do, leave the rest to us at Clix Capital and enjoy a hassle-free experience built just for you.