Speaking of loans, we always get an idea of how to curb the financial crisis in our lives. Well, thinking through this, personal loans are somehow not cheap but they are definitely easier to obtain as compared to business or any other loan. There is no doubt that buying a personal loan solves many of the household problems and helps in stabilizing the financial situation at home.
But, first understand what a Personal Loan is?
This is a type of loan granted by bank or any other financial institutions for personal issues like medical, education, household repairs or construction which is provided on the basis of several criteria such as income or salary, employment status and history, repayment capacity etc. Such type of loans are mostly unsecured as the borrower does not purchase it against any of his collateral goods thus, the lender cannot hold anything in auction.
There are several types of Personal Loans available in the market. Let us have a look at some of them.
- Secured Loans:In this type of personal loan, the borrower guarantees the repayment of loans as against his assets like home, car, land etc. If he fails in repayment, then the lender acquires the asset on which the loan has been acquired for.
- Unsecured Loans:These are the types of loan wherein the person borrows an amount but not against any collateral goods thus, the interest rates are specifically higher.
- Fixed-Rate Loans: In this the interest value remains the same during the entire period of repayment till the loan is paid fully but this type of loan has a bit higher interest rate than the traditional home loans.
- Variable–Rate Loans: It is the entire opposite of fixed-rate loan where the interest rate varies during different intervals as per the condition of the market. This makes it a little riskier than the fixed-rate one but the initial rate is comparatively lower.
- Installment Loans: This type of loan is given for specific amount which is repaid in equal periodic instalments. These could be secured or unsecured and fixes a specific interest rate.
So, these are some of the categories of personal loans. Though this is not the end of the list, we should make a round about the reasons people apply for personal loans.
- Pay all your debts in one go:You have car loans to pay, your house is getting some renovation done, or you are not able to pay for your vacation charges fully. Well, all this is easily resolved when you decide on purchasing a personal loan. It will obviously save your money and won’t put any unnecessary pressure on your income.
- Get a higher credit score: Yes, buying a loan actually improves your credit score as calculated by the credit sections like credit cards or instalment loans. When you are purchasing a loan then you get to stretch out your time and pay your credits with an established payment history.
- House Renovations: A personal loan is a good source of money when you are going for a remodelling of your house. Bring down your paint, refashion your kitchens or get a solid woodwork or floor work. All these are easily payable when you have a personal loan to cover the expenses.
- Start your own dream business:Have a spirit of entrepreneurship but no capital to initiate it! Personal loans can help you in achieving your dream in a simplified manner. So, if you have a mind to start your own business, then set your mind and move forward with your plan of buying a personal loan.
- Pays your Credit Card Bill: The credit card bills are nice to use but becomes a nightmare when it comes the time for repayment. Personal loan solves this problem easily. With a lower interest rate and available for a finite term, personal loans can surely help you out in paying back your credit card expenses.
- Comes handy in case of medical emergency: There is a crucial medical crisis at your home and you don’t have enough money to cover it up. These situations can be handled well when you are buying a personal loan for it that can definitely get your medical expenses covered.
- Lessen your wedding expenditure:A lavish wedding is the dream of many a couples who want to celebrate their best day with full pomp and show. But, with a top-notch wedding comes the matter of money to think about.Personal loans can help in overlaying the entire wedding package creating an easy route for the couples to organize their function.
- Funeral Expenses: Seems a little awkward in itself, but in time of need a personal loan can be your life saver if your family had no insurance plans to cover the funeral expenses which are not at all a paltry sum to bear.