A personal loan is an unsecured loan that does not require collateral. It has fast approval processes due to less documentation requirements. Personal loans have lower interest rates than credit cards or overdrafts in India. Borrowers can use personal loans for any purpose and repay them through easy equated monthly installments over loan terms that typically range from one to five years. However, personal loans require good credit scores for approval and defaulting can negatively impact credit ratings and incur penalties.

1. Personal Loan: Pros & Cons

2. What is it?
A personal loan is also known as an ‘unsecured loan’ as there
is no collateral or security required to procure the loan. Low
interest rates and quick approvals are some of the main
attractions of taking out such a loan.

3. Getting a personal loan is relatively easy as
compared to any other loan.
Personal loans are unsecured, there is no collateral or
security required.
Pros……

4. There is no need to provide any sort of guarantee with your
assets. This is also a reason why most banks and financial
institutions sanction these loans without much
documentation.
Moreover, banks do not need to know the reason of the
loan. You can use the loan for any purpose of your choice as
long as it is repaid on time.
Less Documentation

5. Fast Processing & Approvals
As verification or proof is not required, the processing time
for the loan is considerably reduced. Therefore, you can get
such a loan within a day, or within a week, depending on the
amount being borrowed and your credit rating.

6. Low Interest Rates
What makes it even easier is that there are no middlemen
involved thus avoiding a lot of unnecessary hassles.
Compared to credit cards and overdrafts, the interest rates in
India for a personal loan are fairly low.

7. EMIs
The amount of the loan can be anything between 15,000 to
30 Lakhs, so it isn't a problem for most people. The highest or
lowest amount you can borrow depends on the institute, you
are taking the loan from.
Equated Monthly Instalments or EMIs are an easy way to
pay back the loan.

8. Loan Tenure
 Depending upon the amount borrowed, the loan tenure
would range from one to five years. It would be a good idea,
however, to look out for special schemes and offers to take
advantage of, when seeking such a loan.

9. Cons……
The bank will run some checks on you before granting a
loan. You need to have a good credit score to qualify for the
loan. Therefore, when shopping for loan, it would be a good
idea to consider your current bank with which some banking
history already exists. A new bank would take that much
more time to verify your credit rating.

10. Contd…..
If you do default on the personal loan, there may be a
penalty involved. Your credit rating will get affected too. On
the contrary, an early repayment can also have its
drawbacks. Banks could levy an early repayment fee.
At the end of the day, when quick money is needed, taking out
these loans could prove ideal, however, it is advisable to think
about the terms of agreement, estimate the interest and the
EMI before applying for one

11. Thank You!