Should you go for a personal loan?

Personal loans are becoming quite popular among borrowers who need to tide over a temporary cash crunch or require money to meet some urgent financial need. The popularity of personal loan stems from the fact that these are approved at the shortest possible time, there is no requirement for collaterals against the loan and the funds can be utilised for any purpose by the borrower.

Of course, since personal loans are unsecured loans, the rate of interest charged on these loans is on the higher side as compared to mortgage loans. But since these do not require any mortgage, the documentation required to be done is minimal and, therefore, the time required for approval and disbursal is also minimal.

The popularity of these loans prompted the non-banking finance companies (NBFCs) to jump on to the bandwagon, so apart from banks, there are large number of NBFCs offering personal loans on easy terms. Personal loans are nowadays available online and one need not visit the branch office of a bank or NBFC to apply for the loan. Since online application is a paperless process, the approval is instant, which helps save time and efforts of the borrower.

Personal loans also offer the facility of prepayment after a specified period, which is usually one year, thereby saving interest on the balance amount of loan. Besides, one can apply for a personal loan even if one has already taken other loans such as home loan, car loan, etc. Of course, where the borrower already has other outstanding loans, the lender will assess the repayment capacity of the borrower before approving a personal loan.