There was a time when borrowing used to be considered almost a sin. Whereas today, you name an incident, a loan is available for you from not one but many resources. For reasons aplenty, preference for personal loans in India has been on a rise. According to the Reserve Bank of India (RBI) data, this loan grew at 20.4 % between February 17, 2017, and February 18, 2018. Prima Facie, they are usually unsecured loans, taken out by borrowers for consolidating debts and covering other personal expenditures. As the name suggests, it could be used for any purpose.
In bank lending, the share of personal loans leapt from 3.61% in 2013-14 to 6.90% in 2018-2019. Households availed these loans for repaying high debt, funding their weddings and for travel purposes.
Data Source: RBI, *Up to Nov 2018. % of the figures are year-on-year growth. Loans are outstanding loans.
Contrary to popular belief, personal loans are not only meant to rescue you out of money troubles, but it can also be used in many ways to enrich the quality of your life and widen your horizons. Personal loans could serve as a backup plan when an unexpected need for money pops up, and it could also help in reducing stress in order for you to take charge of your financial situation.
Hence, it comes off as no surprise that the portion of unsecured loans in India has been ballooning over the last eight years. According to the Reserve Bank of India (RBI) data, the total outstanding loan amount with banks stood at Rs. 5.89 lakh crore in May 2010, which increased to Rs. 19.33 lakh crore as on June 2018.
As unfortunate as it may sound, not everyone has the savings on hand to cover the cost that an emergency or major milestone may bring. Personal loan as a financial tool has come through for a large number of people in all walks of life. Here are some ways in which it could be used for large expenses as well as the ones that pop up at inopportune times.
Consolidate other debts:
Consolidating or paying off high-interest debt like credit card bills is not only the most common reason people turn to personal loans but also one of the smartest. It allows you to streamline multiple debt obligations into a single monthly payment with a lower interest rate than you would otherwise have to pay.
For instance, if you borrow Rs. 1 lakh from a moneylender for your sister’s wedding of which interest rate is 2.5% per month. So practically, you would pay Rs. 30,000 as interest to your lender while loan amount would be the same. In such a case, you could take a quick loan to repay the moneylender. A loan of Rs. 1 lakh for two years at 18% a year, would imply an equated monthly installment of Rs. 4,992. After two years, you would have not only paid off the entire loan, you would have paid only Rs. 19,818 as interest, much less than the amount you would have paid the money lender (Rs. 30,000) as interest for one year.
Not only could this potentially lower your interest costs and save you money, but it could also make debt repayment much simpler if you’re able to pay off many credit cards with a single personal loan.
Improve your credit:
Credit card debts could push you towards bankruptcy and tank your credit score. In this scenario, you could avail a personal loan to pay off your high-interest credit card balances and pull up your credit score with time. If your credit report shows mostly credit card debt, a loan might help your ‘account mix’ since having different types of loans is often favourable to your score.
IT may lower your Credit Utilization Ratio—the amount of total credit you are using compared to your credit limit. The lower the amount of total credit you use, the better your score is. It also increases the total amount you have available to use.
Covering medical expenses:
Since deductibles on health insurance plans have risen dramatically in recent years, landing in the hospital or coping with an unexpected illness can be extremely expensive. For those having a hard time to afford medical bills, you can use personal loan for emergency. It would allow you to get the treatment you need without any delay and pay off your medical expenses over time.
The bottom line is that personal loans are useful, given the right circumstances. You could simply visit the Finserv MARKETS website, wherein the easy and cheap Bajaj Finserv personal loan is available. It could be utilised to pay legal fees, fund a cross-country move, take your dream vacation, or pay for a medical procedure like laser vision correction or infertility treatments.
One small click and the Bajaj Finserv personal loan, available on Finserv MARKETS, would provide you with tailor-made loans, transparency, fast online processing and flexible repayment options to fulfil your financial aspirations, whatever they are. Be sure to weigh your options and look into user-friendly information provided on the Finserv MARKETS website before taking the plunge of availing the Bajaj Finserv Personal Loan.
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