One of the most popular loan options in the market today are personal loans. Speedy approvals, quick loan disbursals, and almost no conditions on fund use has led to an increase in the number of people opting for a personal loan for expenses such as medical, travel, house renovations, etc. There is a high competition among lenders to offer such loans which is benefitting the borrowers in the form of reasonable interest rates and streamlined application process. The other benefits include –
- No limitation on fund use:
- Quick and speedy disbursal:
- No collateral requirement:
- Flexible repayment tenure:
- Minimal documentation required:
- Tax benefits:
- No limitation on fund use:
One of the best advantages is that there are restrictions on the end use. A part of the funds can be used for one purpose and the rest for another without any questions or conditions. Even though lenders broadly define different categories of personal loans, there is no compulsion that the loan funds must be used for the defined purpose entirely. For instance, they can be used for funding travel expenses as well as purchase of consumer durables, without any concerns. This flexibility of such loans is what makes them attractive.
- Quick and speedy disbursal:
With the whole process of loan application and approval going online, there is quick disbursal of funds after it gets approved. Most lenders disburse the sum in a couple of hours, and some take a few days. This makes it excellent to raise funds in case of emergencies where time is of essence.
- No collateral requirement:
Personal loans are unsecured, which means the borrower does need to keep any collateral to avail them. These are perfect for medical emergencies, business expansion, or to meet a temporary gap in working capital funding. They can also be used to repay existing loans or other debts which might be costlier.
- Flexible repayment tenure:
Several lenders allow the borrowers to choose the repayment term. Usually, the duration for a personal loan is between 12 months to 60 months. If you have a good repayment track record or a high credit score, then the lender allows you to pick the tenure you are comfortable with. Some lenders even allow borrowers to pay a flexible EMI, where only interest gets, and principal can be repaid as and when the borrower has funds.
- Minimal documentation required:
Unlike a home loan, car loan, these unsecured ones do not require much documentation. The standard KYC (Know Your Customer) documents are required along with income proof. They are typically simple to arrange.
- Tax benefits:
One understated advantage of personal loans is that you receive tax deductions depending on where it gets used. You get exemptions on principal repaid and the interest if used for construction of a house. However, the conditions concerning deductions need to be fulfilled. If the loan has been used for expanding the business or the purpose of the business, then the interest is allowable as an expense. For purchase of an asset, the interest cost gets added to the cost of the asset. Precisely why, personal loan apply is in high demand.
