Why People Mostly Opt For Personal Loans Compare To Other Loans

Huge financial expenses may not show up when you are prepared for them. Instead, they might crop up when you’re least prepared for them. At such times, the best way out is to apply for a loan. Nowadays, you have many ways by which you can get a loan as per financial requirements. However, as recent trends have shown, more and more people are opting for personal loans compared to other loan types. But why is it so? 

To answer this query, here’s an article that seeks to discuss in detail the various reasons that can be attributed to the popularity of personal loans among the masses. It also draws a contrast between personal loans and other types of loans to help you understand why personal loans are better than loans.  Hence, without further ado, let’s get started! 

6 Reasons to consider Personal Loan over other loan types

Following are some of the reasons to consider personal loans over other types of loans:

1. Debt Consolidation

One of the most popular uses of a personal loan is debt consolidation, particularly credit card debt. Personal loans charge an astonishingly low-interest rate compared to credit cards if you have a good credit score. Hence, you can easily use this low-interest financial product to clear off high-interest debt. 

2. An alternative to payday lending

If you need cash to cover an emergency, a personal loan can be the best alternative to a payday loan. Payday loans are usually used for borrowing small amounts of money to meet your immediate expenses until you get your next paycheck. Although you don’t need loan collateral for payday loans, they are usually very expensive. Payday loans are also known as predatory lending because these loans have very high-interest rates, have hidden provisions that require the borrower to pay additional fees, and do not consider a borrower’s ability to repay the loan amount.    

On the other hand, personal loans have much lower interest rates and fees than payday loans. Personal loans also offer more time to repay the loan amount than a payday loan, which must be repaid as soon as you receive your next paycheck. Moreover, unlike a payday loan, a personal loan does not involve hidden charges.

In addition, while you can use a personal loan to improve your credit history, provided you repay the loan amount in time, a payday loan doesn’t help you improve your credit score. This is because payday loan lenders often don’t report the lending to the three major national credit reporting bureaus. 

This means that payday loans don’t show up on your credit score report. Personal loans not only boost your credit, but an improved credit score will also qualify you for better loans and interest rates in the future.

3. Home Repairs and Improvement

Homeowners can utilise either home equity or personal loan to fix damages or upgrade their homes. However, as opposed to unsecured personal loans, a home equity loan is a secured loan. This means that a home loan would use your home as loan collateral. If you fail to repay the loan timely, you will lose your home. On the other hand, since a personal loan is an unsecured loan which means that it doesn’t require loan collateral, you won’t have to worry about losing your home if you fall behind on loan repayments. 

In addition, compared to a home equity loan, you can more easily and quickly secure a personal loan. Moreover, if you use the personal loan amount for home construction, renovation, or for making a down payment for your house, you can claim tax deductions of up to 2 lakh as per Section 24 B of the Income Tax Act, 1961. However, this tax deduction is subject to certain terms and conditions. 

4. Vehicle Financing

You can secure an auto loan for buying or leasing a car. However, since personal loans can be used for a wide range of purposes, you can also use them for leasing, buying, or repairing a vehicle. Although auto loans usually have lower interest rates as opposed to personal loans, auto loans are secured loans and thus use your vehicle as loan collateral. On the other hand, personal loans are unsecured and do not require collateral. Hence, if you are worried about missing your loan repayments and getting your vehicle repossessed, then availing of a personal loan might be the wisest choice for you. 

5. Quick Disbursal

Since it is mostly in times of financial need, you tend to look for taking loans – the quicker the loan is disbursed, the better. However, not all loans are disbursed quickly. The disbursal period of a home loan is about 3 to 4 weeks. On the other hand, the period of a personal loan is merely 24 hours to 72 hours. However, you must have a good credit score and meet the required eligibility criteria to get your loan disbursed quickly. If you satisfy these two requirements, personal loans are doubtlessly the best financial product for addressing urgent payment or cash requirements. 

6. The versatility of Personal Loans

A personal loan, unlike other loans, can be used for a wide range of purposes. It can be described as a multi-purpose loan. Banks and lenders don’t impose restrictions or limitations on the end user. This is one of the best things about a personal loan. On the other hand, home loans can be used only for housing purposes, such as buying or building a home or renovating a house. Similarly, an auto loan cannot be used for anything other than buying a car. However, you can use a personal loan to buy a car, build or buy a home, repair your home, and so on. 

Conclusion 

Personal loans undoubtedly stand out among many loan options due to their unique features. Hence, it is no wonder that more and more people are availing of personal loans as opposed to other types of loans to meet their financial needs. However, before opting for a personal loan, thoroughly review your financial condition to check whether a personal loan is an ideal option for you. Always remember that borrowing money must not be done on a whim. 

The good news is that you can now apply for a personal loan from Piramal Finance. It is a registered finance company that provides hassle-free, quick, and easy personal loans with zero prepayment and foreclosure charges. Their team of expert advisors would also help you through the entire loan application process, thus ensuring fast approvals and quick disbursals in your account. Piramal Finance also guaranteed minimum documentation and pocket-friendly monthly EMIs. For further details, visit the official website now!