It is a fact that the need for quick funds can arise at any given time and to anyone. If you are already among the uber rich or have been adding to your financial nest keeping in mind any kind of emergency, then there is a high possibility that you will be able to manage your emergency at the time.
However, there are some who are still in the fund accumulation or savings stage and may not have enough money at the time of emergency and others who would not wish to break open their savings. What would or rather should you do at a time like these?
What you can do is to apply for a loan so that your immediate needs are met with. Now, loans take time to be disbursed and emergencies wait for no one. Instead of having a panic attack at this moment, what you can do is take a personal loan instead. Lenders like Tata Capital are some of the known financial institutions that can help you with a personal loan in times of need.
Yes, all loans have implications as well as their own rules and before you avail a personal loan, it is important that you have the basics in place:
- Unsecured and yet safe: While loans generally tend to give you the idea that you will need to keep some collateral, this is not the case with personal loans. A personal loan is an unsecured loan where you don’t provide any collateral or security against the loan. It is as simple as that.
- Long and short of it: There are long-term loans and then there are short-term loans. Typically, a personal loan can be taken for a short duration to meet some urgent financial requirement you may have.
- Paperwork: You can apply and get sanctioned for a personal loan with the minimum of basic formalities that include submission of your KYC documents, proof of income and proof of your creditworthiness including your CIBIL score.
- Eligibility: You are eligible for a personal loan if you are capable of showing proof of your income to repay the loan that you have availed. You need to be a salaried person between 21-58 years of age or a self-employed person between 25-65 years of age to apply for a personal loan subject to other terms and conditions imposed by the lender. You can be eligible for a personal loan up to a maximum of Rs 25 lakh depending on your income and repaying capacity. You can check your eligibility online to see if you fall in the eligibility bracket.
- Purpose of loan: You can use your personal loan amount for any legal purpose. Be it a wedding, a travel plan, a medical emergency, or for any other purpose; you can use the funds from the personal loan, as there are no restrictions from the lender unlike in other types of loans.
- Tenure: Nothing last forever and neither will your personal loan. Now, it is imperative to know beforehand your tenure of the loan. Typically, financial institutions like Tata Capital offer you a tenure ranging from 1 year to 7 years. Since the interest rate is high, it does not make sense to bound by a personal loan for longer tenures. You must realize that personal loans are good as long as you use them to tide over a difficult financial situation and not use them for longer tenures.
- Payback options: There is no such thing as a free lunch. You will have to repay the personal loan that you have taken. Yes, this an additional outflow from you monthly spendings and you may need to priorities a few expenditures. However, there are easy repayment options that you can choose. First and foremost, you should check your monthly EMI before you take the loan. There are online EMI calculators that will give you an idea about the principal amount that you would need to repay. Once you understand that aspect, many NBFC’s offers easy EMI options that be suitable to match your repaying capacity. You can also prepay with attendant conditions, which many lenders waive. Remember that longer tenures mean lower EMIs but equally longer tenures for personal loans can affect your borrowing capacity for other secured loans such as home loans or car loans. So, use the personal loan carefully.
- Interest rate: If there is a loan, there is an interest. Since the personal loan is an unsecured loan, your lender will charge you a higher rate of interest. For instance, Tata Capital charges you a minimum of 10.99% interest for your personal loan whereas, for a home loan, the interest rate would be 8.7%. Interest rates can be high if your credit score is below a certain threshold fixed by the lender. On the other hand, if you have a good relationship with the lender with a high credit score you can get the loan at the lowest interest possible.
- Disbursal of loan: The process for availing a personal loan is quite simple. Lenders such as Tata Capital offer online processes that can allow you to receive the funds within 72 hours or less if you satisfy all the terms and conditions imposed by it to grant the loan. These may include your credit score, KYC documents, relationship with the lender and your ability to repay the loan along with interest.
Now that you have the basics clear, securing a personal is quite easy and it is up to you to use the facility carefully considering all aspects of financial planning before you avail the personal loan. After all, a stitch in time saves nine!