Finance

How Does A Personal Loan Help In The Context Of Saving?

An instant personal loan can be utilized for several reasons. Regardless of the fact that you require the funds for paying the dues, clearing medical bills or any of the personal reasons, you can easily apply for a personal loan to avail finances conveniently. The easy availability of funds, minimal documentation requirements and a quick approval procedure has made it an ideal option to get funds. You do not need to state the reason for borrowing the funds and your loan will get approved in no time. If used properly, personal loans funds can actually help you save money in several ways. Some of them are explained below:

  • To Meet A Big Expense

The freedom of use on personal loans, combined with the ease of availing the loan, makes it the ideal tool to finance a wide variety of expenses. Availing a personal loan can not only get you quick cash but also provides you with the liberty to repay the money over the years in EMIs. Since the interest rates on loans are low, it is a cheaper way to finance big purchases.

  • Help Improve Your Credit Score

In order to have a good credit score you need to have a good credit repayment history. When you avail a personal loan, the full amount is to be repaid in a fixed period. And if you repay the loan in full at a given time, it not only lowers your credit utilisation but also improves your credit score. A payment default, on the other hand, can lower your credit score, so the best way to avoid this is to make your EMI payments on time with the help of the personal loan amount.

  • Lower Interest Rates

The rate of interest charged on personal loans is lower than those charged on most credit cards or even home loans. Therefore, personal loans can be used to make purchases in lieu of credit cards making it a good money-saving strategy.

  • Consolidation Of Debts

You can avail a big amount, low-interest personal loan to pay off your other high-interest debts. By consolidating your debts you can easily save money on a high-interest student loan or your credit card bill, by repaying them faster with the help of a personal loan. However, remember to check with your bank about their prepayment policies as some money-lending institutions charge penalties for not completing the loan repayment tenure of a loan or charge additional fees for foreclosing it.

  • Smart Repayment Plans To Increase Savings

Before availing a personal loan, you can choose the most appropriate loan repayment plan depending on your current financial status to enhance your savings. For those who are expecting their financial conditions to improve in the near future, due to a promotion, for example, can apply for the step-up loan repayment option. The loan EMI scheme starts off at low-interest rates that gradually increase over time.

Personal Loan Eligibility Criteria

To avail a loan you need to be eligible for the same. You need to meet the basic loan eligibility criteria for an instant personal loan

  • You need to be an Indian citizen to be eligible for the loan
  • You should be a salaried individual to be able to provide proof of your credit
  • You need to be between the ages of 23-58 years to apply for a loan
  • A good CIBIL Score will showcase your financial ability to repay the loan amount.
  • There should be no outstanding amount on your credit card or other existing loans.

Documents Required

When applying for a loan you have to submit certain personal loan documents and paperwork which will attest to your creditworthiness as an individual. This documentation consists of your personal information to understand your financial credibility as a salaried or self-employed individual and release your loan amount as soon as possible. Given below is a list of documents required for a loan

  • You need to submit a proof of identity, like a PAN card, Aadhar card, Voter’s ID card, and driving license.
  • Proof of residence like Electricity bill, Gas bill, or Leave and License Agreement.
  • You also require bank statements for the last 3 months. This helps in calculating your CIBIL Score, your credit history and your overall creditworthiness.
  • You will also need to provide your salary slips of the last 3 months
  • Your passport size photographs

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