People believe the festival season is the best time to start new projects and make investments. It is a happy period that welcomes health and prosperity, which is why the market sees an increase in demand for a range of goods and services. Also, holiday bonuses and tempting business offers mean that people have more money to spend.
Since there is a lot of buying involved—for yourself, your loved ones, or your home—the holiday season can be a little taxing on the wallet for some people. However, small personal loan apps and loan agencies that lend money for consumer durables offer many festive deals at this time of year.
Several tempting offers are available to assist you in budgeting for the holidays. In addition, several companies offer small personal loans and loans for consumer durables without charging any processing fees. Here are some crucial reasons why taking a small personal loan is a good idea:
1. A Lower Rate
During the holiday season, many financial institutions (FIs and NBFCs) provide promotional interest rate discounts to win over new consumers. However, the small personal loan interest rate is often between 10% and 24% per annum, which is quite expensive.
You can negotiate a reasonable interest rate with your personal loan agency if your credit history and score are both solid. However, remember that most lenders lower their rates by just 0.25% to 0.50%, which helps if you borrow a large quantity of money for a long time.
2. Reduced Processing Fee
A typical lender fee ranges from 1–3% of the loan’s principal. To get more customers, they come up with different ways to cut the cost of processing. Depending on the lender, the processing charge for a small personal loan might range from 0-50% of the loan amount.
3. Negative Collateral
A personal loan’s main benefit is that you don’t have to purchase any collateral to get one. Unlike with a secured loan, you won’t need to put up any collateral to get this one. However, personal loans are typically unsecured; thus, borrowers must pay a higher interest rate.
4. Immediately Available
Processing times for unsecured personal loans are much shorter because you don’t have to put up collateral or fill out as much paperwork. As a result, a small personal loan can be processed and disbursed in as little as two business days. But there’s more: some customers (those with an established banking account and a stellar credit history with the lender) can access fast personal loans in just a few minutes.
5. Raises Credit Rating
Getting an unsecured loan and paying it back on time can help you establish credit and raise your credit score. Getting a loan is an excellent option, but only if you have substantial financial discipline and reliable income to pay it off.
In other words, if you have approval for a loan of Rs. 1 crore but should only borrow up to Rs. 30 lakhs, you should borrow no more than Rs. 30 lakhs. Equally important is ensuring you have the correct balance between secured and unsecured debt. If you want to lower your credit score, you should not have any secured loans.
Consider these factors before applying for a festive loan
The two primary considerations when taking out a holiday loan are:
1. It’s not a good idea to get too enthused about one ‘great’ personal loan offer and ignore other alternatives just because it stands out. Instead, shop for the best deal and interest rate you can find throughout the holiday season, whether at a bank, a loan app, or a personal loan agency.
In addition, you should focus on more than just promotional rates and reductions, i.e., the total cost of the loan itself. For example, in most cases, even a 1.5% drop in the interest rate is better than a 100% drop in the processing fee.
2. Unfortunately, financial obligations last much longer than celebrations do. After getting a loan, you’ll need to start making monthly payments, or EMIs. Since EMI payments will add to your regular expenses, you should plan to avoid unpleasant financial surprises.
Planning to apply for a small personal loan? Remember these things:
There are a few things to watch out for if you want a personal loan over the holidays:
1. Make sure you meet the prerequisites
It would be best to research the prerequisites for a small personal loan before applying. If you apply for a personal loan without meeting the requirements, your application could be delayed or even denied. Besides keeping you from getting a personal loan, it could lower your CIBIL score.
2. Maintain an excellent credit rating
You can quickly get a small personal loan from a person or company with a CIBIL score of 750 or higher. If your credit score is high, it shows that you can afford to make your monthly loan payments based on your income and present standard of living.
3. Try not to take out loans too frequently
It’s easy to let yourself get swept away by tempting deals while you’re in the holiday spirit, but doing so can have disastrous consequences. Things can quickly get out of hand when we take on more debt than we need to satisfy our whims. You could end up in hot water if you borrow too much money, so limit borrowing to emergencies only.
4. Choose the best financial organisation
Once you’ve settled on a personal loan, it’s time to start looking for a bank or other financial organization that will provide you with favorable terms. People with regular jobs or who work for themselves can choose from a wide range of personal loan agencies, all of which have attractive promotions. But, again, make an informed choice with practical comparisons.
With instant personal loans, you don’t have to worry about how to pay for a special event when you don’t have a big savings account.
When looking for a fast personal loan, banks offer various types of loans that satisfy your needs, which you should consider. If you meet the criteria, you can get a quick, small personal loan of up to Rs. 5,000,000. Want to learn more? Get in touch with experts at Piramal Finance.