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Beyond the Numbers: Exploring the Benefits of Personal Loans

21 June 2023

Author: Mpower Credcure

WHAT IS THE MEANING OF PERSONAL LOANS?

1. Personal loans are a type of unsecured loan that individuals can obtain from banks, financial institutions, or online lenders to meet their personal financial needs. Unlike specific-purpose loans (such as home loans or car loans), personal loans can be used for various purposes, including debt consolidation, medical expenses, home improvements, wedding expenses, travel, or any other personal financial requirements.
2. If you need money to cover a big ticket purchase, home improvement project, financial emergency or debt consolidation, Personal Loans are the solution. Personal loans are a type of unsecured loan that individuals can obtain from banks, financial institutions, or online lenders to meet their personal financial needs.

HOW DO PERSONAL LOANS WORK?

1. Personal loans typically offer more favorable interest rates compared to credit cards. These loans are generally unsecured, which means you don't need to provide a collateral (an asset) that lenders can seize if you're unable to repay the loan.
2. Personal loans operate similarly to most other types of loans. To apply for a personal loan, individuals can approach a bank or lending institution and complete the necessary application process. They must also provide all the required documentation specified by the lender. The provided information undergoes verification by the bank to ensure its accuracy and authenticity.
3. Additionally, the lender assesses the borrower's creditworthiness before extending a loan offer. If the borrower accepts the offer, the loan amount is transferred to their bank account, allowing them to utilize the funds according to their needs.
4. Repayment of the loan amount is typically done through equated monthly installments (EMIs). The installment amount is determined based on factors such as the loan amount, interest rate, and loan tenure.
5. Before applying for a personal loan, it's advisable to thoroughly understand the terms and conditions, including interest rates, repayment tenure, and any associated fees or charges. By utilizing personal loans responsibly and making timely repayments, individuals in India can leverage the benefits of personal loans to improve their financial well-being and achieve their dreams.

PERSONAL LOANS BEYOND THE NUMBERS

Personal loans are not just about the financial figures; they offer numerous advantages beyond the numerical aspects.

Let's delve into the broader benefits of personal loans-

1. Flexibility: Unlike specific-purpose loans, personal loans provide flexibility in how you utilize the funds. Whether it's consolidating debt, covering medical expenses, financing home improvements, or planning a wedding, personal loans cater to diverse financial needs.
2. Convenience: The application process for personal loans has become increasingly streamlined, especially with the rise of online lenders. The convenience of applying from the comfort of your home, coupled with quick approval and fund disbursement, makes personal loans a convenient choice.
3. Lower Interest Rates: Personal loans often come with more favorable interest rates compared to credit cards, making them an attractive borrowing option. By opting for a personal loan instead of relying on credit cards, you can potentially save significantly on interest payments.
4. Credit Building: Responsible repayment of personal loans can contribute to building or improving your credit score. Making timely payments demonstrates financial discipline and positively impacts your creditworthiness, opening doors to better loan terms and financial opportunities in the future.
5. Simplified Repayment: Personal loans typically follow an equated monthly installment (EMI) structure, simplifying repayment. With fixed monthly payments over a predetermined period, budgeting becomes easier, allowing you to manage your finances more effectively.
6. Unsecured Nature: Personal loans are usually unsecured, meaning you don't have to pledge collateral as security. This eliminates the risk of losing assets if you are unable to repay the loan, providing peace of mind.
7. Debt Consolidation: Personal loans can serve as a valuable tool for consolidating high-interest debts into a single, more manageable loan. By merging multiple debts, you can simplify repayment and potentially save on interest costs.

ADVANTAGES OFFERED BY OPTING FOR PERSONAL LOANS IN INDIA

1. Flexibility: Personal loans provide borrowers with flexibility in terms of usage. You can use the funds for various purposes, such as home renovation, education expenses, medical emergencies, debt consolidation, wedding expenses, travel, or any other personal financial needs.
2. Quick Approval and Disbursement: Many banks and financial institutions in India have streamlined their processes to ensure quick approval and disbursal of personal loans. Some lenders even offer instant approval and disburse funds within a few hours or days, allowing borrowers to access the funds promptly.
3. No Collateral Required: Personal loans in India are generally unsecured, meaning you don't have to provide any collateral or security to obtain the loan. This reduces the risk for borrowers who do not have assets to pledge as collateral.
4. Easy Application Process: Applying for a personal loan in India is relatively easy. Most lenders provide online application facilities, allowing borrowers to apply from the comfort of their homes. The documentation requirements are usually minimal, making the application process convenient and hassle-free.
5. Competitive Interest Rates: Personal loan interest rates in India vary based on factors such as the borrower's credit history, income, loan amount, and tenure. However, compared to other types of loans, personal loan interest rates are often competitive, especially for borrowers with a good credit score.
6. Fixed Repayment Schedule: Personal loans typically follow a fixed repayment schedule, where borrowers have to repay the loan in equated monthly installments (EMIs) over a predetermined period. This makes budgeting and financial planning easier for borrowers, as they know the exact amount they need to repay each month.
7. Credit Score Improvement: Timely repayment of personal loans can have a positive impact on your credit score. By making regular payments, you demonstrate your creditworthiness and responsible financial behavior, which can help improve your credit history and increase your chances of obtaining loans in the future at better terms.
8. Debt Consolidation: Personal loans can be used for debt consolidation purposes, where borrowers can combine multiple debts into a single loan. This can simplify the repayment process by managing only one EMI and potentially help borrowers save on interest payments.

CONCLUSION

✓ In conclusion, personal loans offer a multitude of benefits that make them an attractive financial option for individuals in India. With their flexibility in usage, borrowers can address a wide range of personal financial needs, whether it's funding a home renovation project, consolidating debts, covering medical expenses, or planning a dream wedding. The convenience of the application process, often available online, coupled with quick approval and disbursal of funds, makes personal loans a convenient solution.

✓ Mpower Credcure is a fintech start up that is providing financial services to individuals and MSMEs. To briefly summarise Mpower has had prior experience in debt collection which gives it a deeper understanding of credit risk assessment and debt recovery processes.

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