The pandemic situation has disrupted the steady cash flow and other means of earning for millions of people across the globe. For unforeseen expenses, it is vital to know about personal loans. Read more to get a comprehensive review of the same.
On 24th March 2020, the Prime Minister of India announced a nationwide lockdown in the country to fight against the deadly COVID. While the lockdown was lifted in phases starting May 18th, the effects of the pandemic on the economy have been disastrous. Millions lost their jobs, with millions more facing a reduction in their earnings. With people facing a financial crunch like never before, many have turned towards loans to tackle the crisis. Let’s have a look at how personal loans can help you tackle this crisis.
What Is A Personal Loan?
A personal loan is an unsecured loan. It can be procured without collateral. An individual can borrow this loan to meet the financial needs during an emergency or fund any other personal expense.
The tenure of the loan ranges from 1 to 5 years, and the loan amount is usually disbursed within 7 working days after its approval. Some lenders also disburse the amount within a few hours, depending on your application.
Eligibility For Personal Loans
The eligibility requirements depend on a few factors, which may differ depending on the financial institution you chose. However, most lenders look at the following factors before approving your loan.
- Your place of address
- Your occupation
- Your income
- Your current financial liabilities
- Your repayment capacity
- Your credit score
People with higher credit scores and less unpaid loans/EMIs usually stand a better chance to obtain better loan amounts.
Once you apply and submit the loan application along with relevant documents, the lender will process it and disburse the loan amount to your preferred bank account.
Benefits of Personal Loans
Zero Collateral: Unlike other loans, here, you don’t have to pledge your assets against the loan.
Tax Benefits:According to section 24 (b) of the Income Tax Act, you can get a tax deduction up to Rs 30,000 on the interest paid for the loan that is used for home renovation. Furthermore, if you have used it for a home purchase, then you can get a tax deduction up to Rs 2 lakhs for the interest paid towards the loan in a financial year.
Hassle-free Processing: Documentation procedures for the loan are simple. Some lenders disburse the amount within 8 hours of application provided it is approved.
Flexible end-use: The borrowers have full autonomy over where to use the loan amount—more on this below.
How Can Personal Loans Provide Financial Security During COVID?
Unlike a car loan, home loan, or education loan, which can only be used for a specific purpose, the scope of usage of a personal loan is much wider. It can be used for a wide range of sudden expenses such as;
- Fund wedding expenses
- Pay for medical emergencies
- Pay for upcoming travel
- Pay for funding education not covered in the education loan
- Consolidate your credit card bills and other debts
- Purchase a new home
- Renovate your home
Use the Loan Smartly
A financial emergency can arise anytime, anywhere, and even more so during COVID. Therefore, it is necessary to be prepared to obtain monetary help to secure an economic crisis. However, make sure you draft a clear plan for repaying the loan before applying.