Imagine you have been planning to take a family vacation to some foreign land but are unable to do so simply because you don’t have a lump sum amount of money in your bank account. Alternatively, you have accumulated substantial credit card debt and now are behind on your payments. This is hurting your credit history. Even though you have a stable income, you just can’t seem to save enough money for footing big bills. These payments can also include sudden large medical expenses or huge home repair costs. Considering the option of taking a personal loan while facing such situations can be a lifesaver.
What Are Personal Loans?
A personal loan is generally taken to assist borrowers in making a big payment immediately. This loan can help you meet your short-term financial needs fast. A personal loan is unsecured in the sense that it does not require the borrower to keep anything as collateral or assure a guarantor with the bank. Unlike home loans or business loans that are given out for specific purposes of buying a house or running a business, personal loans can be taken to fulfil any end goal.
Personal Loan Eligibility Requirements – 2020
|Minimum income||Rs 25,000 P.M. for salaried employees; Rs 5,00,000 gross P.A. for self-employed professionals|
|Age bracket||21 – 60 years|
|Duration of work experience||Minimum of 3 years|
|EMI Cap||65% of the income|
|Minimum CIBIL score (credit score)||650|
|Employment type||Employees working in MNCs, private firms, government jobs and self-employed professionals like doctors, artists, business owners, CAs, etc.|
Optimise Finances Through Personal Loans
Remember that personal loans are given out at lower interest rates as opposed to many other lending instruments. There are several ways in which this type of loan can help save you money. Read about a few significant ones below.
Additional Read:- Top 4 Things You Should Know About CIBIL Score to Get a Personal Loan
Credit card debt consolidation
This is one of the smartest reasons to obtain a personal loan. If you are struggling to repay your credit card debt due to high-interest rates, then availing a personal loan which is sanctioned at a much lower interest rate to repay your debt will save you a lot of money. Credit cards generally have high interest rates of around 20% per annum. However, a personal loan is issued at rates ranging between 9% – 12% per annum. Hence, it makes more sense to save on your overall interest payments by taking a personal loan and immediately paying off all your credit card debt.
Improve your credit rating
Lenders will label you a high-risk borrower if you have credit card debt and you keep maximising your credit card limit. Utilizing a personal loan to pay off your credit card debt will significantly improve your credit (CIBIL) rating. Since this loan is sanctioned for a fixed amount of time, repaying it in full by the end of the prescribed term will improve your credit rating. This will help you get bigger loans sanctioned at better interest rates, for when you want to buy a home or fund your child’s education.
Under the Income Tax Act, if you avail of a personal loan to make a down payment or renovate your house, you are eligible for income tax deductions of up to Rs 2,00,000 under Section 24. Usually, house buyers avail of Section 24 to lower their home loan interest rates. However, this section can also be used for people that don’t want a home loan but need money to get housing-related construction work done.
Avoid hidden fees
Credit card companies often levy hidden charges on cardholders. Users are unaware of these charges as they are concealed well within the statements. Personal loans, on the other hand, have no pesky hidden charges and allow users to make big payments more transparently. The loan can be repaid without having to incur any hidden fee. This saves the borrower a substantial amount of money throughout the loan tenure.
Additional Read:- How Personal Loans Helps in Your Business?
Need quick financial assistance for an unfortunate emergency? Avail Personal Loans with Tata Capital and take care of your big expenses at competitive personal loan interest rates. Log on to our website to check your personal loan eligibility using our eligibility calculator.