Personal loans are among the best loan options in India today. To begin with, they can be used for almost any purpose. For instance, you can use a personal loan to go on a vacation or to cover an unexpected medical expense. They are also unsecured. So, you don’t have to offer something to the lender as collateral to avail of a personal loan.
Generally, personal loans are paid back over a set term. This can range anywhere from two to five years, depending on the financial institution you borrow from. Additionally, based on your creditworthiness, you get various interest rates, tenor, and principal amount to choose from.
However, did you know you could use your savings account to get a personal loan?
If not, here’s more on this topic.
What Is A Savings Account?
A savings account is an essential financial product that everyone must consider. It allows you to keep your money safe and earn interest on it. While the interest isn’t very high, it is still better than nothing.
Unlike a fixed or recurring fixed deposit account, a savings account is where you can store your money for short-term needs. For instance, you can park part of your money in the savings account as an emergency fund and withdraw it whenever you want.
Before opening a savings account, you must do your research. Learn about the interest rates offered by various financial institutions, minimum and maximum balance requirements, service charges, etc. This will help you land the best option and secure your financial life in the long run.
How Can Savings Accounts Help With Getting A Personal Loan?
If you have a savings account at a specific bank, availing of a personal loan from them becomes easier. The logic behind this is simple.
When you open a savings account, you entrust the bank with your money. You offer them control of your funds and have them take care of your financial needs. Now, the bank appreciates your confidence in them and repays you through assistance during a financial crunch. This is often in the form of personal loans.
Since you have a history with the bank, you are eligible for a personal loan with a quick turnaround time, lower interest rates, and minimal documentation. In most cases, the bank might pre-approve you for a personal loan. So, all you got to do is complete an application form digitally to get the funds credited to your savings account.
What Are The Other Benefits Of A Savings Account?
While there are several benefits, listed below are the top benefits of having a savings account.
One of the major benefits of keeping your funds in a savings account is liquidity. Unlike a fixed deposit, a savings account gives you complete access to your funds. You can deposit or withdraw money anytime and from anywhere you want. Furthermore, the debit/ATM card that comes with the savings account makes shopping and paying bills easier, both online and offline.
Though not high, most banks offer an interest rate of 2.5 to 7 percent on savings accounts. So, make sure you research the various financial institutions and the interest they offer on savings accounts before narrowing down on an option.
Unlike keeping your money at home, storing your money in a savings account is safe. This is because the bank takes complete responsibility for your funds. The Reserve Bank of India (RBI) has put stringent regulations in place to ensure the safety of money placed in banks. So you can be worry-free.
Additionally, most banks offer deposit insurance. This can range anywhere from Rs 1 lakhs to Rs 5 lakhs.
- Online Transactions
Currently, most banks have a net banking portal or a mobile app. So, fund transactions, making deposits, requesting a chequebook, etc., are more convenient than ever. Furthermore, people who are extremely careful about their spending habits can use the bank’s online portal or mobile applications to track their expenses.
- International Debit Cards
Several banks these days offer chosen savings account holders free international debit cards. It can be an excellent option for people who study or work abroad. The debit cards can be used to withdraw cash from ATMs abroad without paying additional charges.
How To Open A Savings Account?
Opening a savings account is easy. You can visit your nearest bank branch or complete the application online. Regarding the eligibility criteria, the account holder must be 18 years of age or older. Nonetheless, many banks these days offer savings accounts customized for minors (children below 18). Such accounts can be managed by kids independently. However, parents can choose to supervise the account activity.
That being said, here are the documents required to open a savings account.
- Identity Proof—Voter ID, Aadhar Card, Passport, PAN Card, Driving License, etc.
- Residence Proof—Electricity Bill, Water Bill, Telephone Bill, Gas Pipeline Bill, Property Tax Bill, etc.
Final Thoughts On Savings Accounts And Personal Loans
On the outside, all savings accounts may look the same. However, if you take a closer look, you will see that they differ in various aspects. For instance, some banks might offer savings accounts with a higher minimum quarterly balance requirement but a higher interest rate too. Other banks may offer a lower minimum quarterly balance requirement and a lower interest rate.
As a responsible consumer, you must analyze all the aspects and choose the most ideal savings account. Essentially, weigh the pros and cons and keep your financial goals in mind when comparing.
Because, at the end of the day, how well you maintain your savings account and meet the requirements will impact your eligibility for a personal loan. So, it is good to be on the safer side right from the beginning.
Lastly, check out Piramal Finance’s personal loan page if you are looking for a personal loan. Loaded with perks, this might be the one option that could put an end to your search.