What is a Personal Loan?
A personal loan is a fund you take out to fulfill big expenses. These loans do not require you to provide any security. It usually has low-interest rates. Also, it has fewer monthly payments. You can use the personal loan for various purposes. For example, you can use it for weddings, medical expenses, or education.
Otherwise, you can use them to buy any major household appliance or pay off previous loans. With a personal loan, you have a fixed monthly amount you need to pay. It also comes with a fixed tenure.
How Does a Personal Loan Work?
Once you qualify for a personal loan, you get the amount directly in your bank account. When you get the money, your repayment starts after 30 days. If the loan has a fixed rate, then the monthly instalments will be the same. But if your loan is a variable one, the installments will change.
How to Choose the Best Personal Loan in India?
It is easy to get a personal loan today, Currently, many banks and organizations offer such loans. So, it is tough to choose one of them. Here are a few tips to help you choose the best personal loan in India.
- Look at the interest rates: When getting a personal loan, keep an eye on the interest rate. Choose an affordable interest rate. The rates usually differ among banks. So, it is best to do your research first.
- Know about the extra charges: Do not blindly go for personal loans with a low-interest rate. Check the loan details for any hidden processing or other charges. For instance, there can be penal charges and bounce charges. While some may offer low-interest rates, you may end up paying more than you should.
- Read the loan documentation: We recommend choosing a personal loan with the least amount of documentation. If you need money urgently, you will not have time to fill out many forms. Also, read the documentation carefully before proceeding.
Personal Loan: The Secrets to Saving Money
Almost all of us have been in situations where we needed money urgently. A personal loan is the best way to get funds instantly. A huge number of people use personal loans to fulfill their expenses. A personal loan does not have huge interest rates. Also. It also helps to improve your credit score. Below is a list of how personal loans can help you save money.
Allows you to fulfill huge expenses
We all come across situations where we need money. A personal loan is not only quick but easy to apply too. You also have the option of paying back smaller amounts. This is a cheaper option than using credit cards. Usually, credit cards have a huge rate of interest. So, choosing a personal loan lets you save money in the long run.
Prevent hidden charges
Credit card owners often claim that they are charged additional fees. People usually do not know about these charges. So, they end up paying more than required. Here is where a personal loan fits well. If you have a large expense, a personal loan will be more beneficial. Read the documentation carefully to learn about all the added charges.
Boosts your credit score
For example, you have a huge credit card bill. Your lender will see you as a high-risk borrower. Here is where a personal loan is helpful. When you take a personal loan, you get tenure to repay it. Once you repay the full amount, you can boost your credit score. Also, you need to ensure that you make monthly payments. This will help you in the long run.
Another way to save money is through flexible repayment options. When getting a personal loan, you can choose the repayment option based on your income. Also, you can compare various loan options. This will allow you to save tons of money.
Personal loans do not come with any tax benefits. But if you use it for the renovation of your home, you can claim tax benefits. In such a case, you can claim a 2 lakh tax deduction under Section 24B. But to claim this, you will need proper documents and receipts.
So here are the top 5 ways you can save money using a personal loan.
The Bottom Line
A personal loan is quick money with the least documentation. You have several options when it comes to choosing the term and monthly EMIs. They are helpful to cover a wide range of expenses. Unfortunately, people end up choosing the wrong loans.
This makes them pay more than expected, thus losing money. But now you know how to play it safe with personal loans. Now you, too, can save money using these loans. If you would like to know more, visit the Piramal Finance website. They are home to some amazing finance-related content.