In the new millennium, instant personal loans (PLs) have become extremely popular among diverse cohorts as a financial product that provides a speedy solution to address various financial objectives.
Unlike secured loans that require some collateral such as a home, car, share certificates, etc., PLs are granted based on an applicant’s creditworthiness and income. In essence, a PL is an unsecured loan that borrowers can utilise for any purpose unlike a car, home or other loans, which must be used solely for the purpose mentioned in the loan agreement.
Typically, PLs come with fixed interest rates and repayment norms, which makes them a predictable and affordable way to borrow money. The emergence of fintech firms has made it easy to procure PLs via swift, hassle-free online applications.
Despite the easy availability, it makes sense to utilise the PL amount judiciously. Here are some ways for borrowers to use such funds more efficiently:
Consolidating existing debts: One of the best ways to use an instant PL is for streamlining payments and consolidating existing debt. Consolidation denotes the practice of using the new PL to pay off current loans that can collectively exert a greater debt burden. As a result, it lowers the overall interest rates, helping a person manage his/her finances better.
For example, a credit card outstanding attracts much higher interest rates. So consolidating such debts via a single PL with a lower interest rate reduces the total debt burden, helping one become debt-free faster. Also, a single EMI payment every month is easier to manage rather than multiple repayments.
Improving one’s credit score: Multiple repayments each month means borrowers run the risk of inadvertently missing out on some payment. This could then impact a borrower’s credit score, making it difficult to procure loans in future at favourable interest rates. Therefore, taking a PL and paying off multiple debts to consolidate this into a single EMI can reduce the risk of accidental default.
Consolidation of debt also helps borrowers maintain a healthy debt-to-income ratio. Taken together, these factors help improve the credit score of borrowers. In turn, they become eligible for bigger loans, such as housing loans, in future.
Meeting unexpected medical expenses: Health emergencies can come without warning, raising the need for sudden monetary requirements. In such scenarios, an instant PL disbursed within hours can be a lifesaver during a medical emergency. This also helps users avoid borrowing funds via credit cards or other means that attract steep interest charges. An instant PL can also be used to undergo a medical procedure that one may have been avoiding for months due to the paucity of funds.
Fulfilling academic needs: For students (or parents) seeking extra financial support to meet high education fees, PLs can help fund such expenses, including tuition fees and other academic needs. These loans are especially useful for students wishing to opt for higher academic pursuits or overseas studies. PLs are also useful for students who may not be eligible for conventional educational loans. Herein, the parents can avail of instant PLs to meet their academic needs. Even working professionals wanting to apply for some short vocational courses, higher education, etc. can take PLs.
To make things seamless, digital lending portals have transformed how students or others can access financial support by eliminating unnecessary and extensive paperwork or cumbersome approval procedures. The flexible repayment options and competitive interest rates also make life easy for students to manage their funds while studying. Since digital loan platforms can be accessed 24x7 from anywhere, it allows students to take loans from the safe confines of their dorms or homes.
Renovating the home: Home renovation, upgradation or remodelling projects are another excellent way to use an instant PL. By improving one’s living conditions, borrowers can add value to their homes and enhance the overall quality of life. This can be done by installing modern fixtures and the latest equipment or redesigning the interiors to augment the comfort quotient. For those seeking to sell their property, home renovation can help increase the overall resale value.
Managing marital expenses: Weddings in India can be a costly proposition, given their once-in-a-lifetime nature and the desire of parents to make the event marvellous and memorable. But planning a gala wedding can be a demanding task requiring major funds at short notice. Borrowing funds from moneylenders or using credit cards can only inflate the borrower’s burden. But an instant PL can help manage wedding expenses without undue financial stress.
Realising business expansion plans: Small entrepreneurs and other businesspersons can enjoy many benefits through an instant PL. This could cover the funding of business expansion plans, purchasing equipment to grow the business, shifting into new, larger premises or meeting urgent funding needs. PLs can be beneficial for both self-employed professionals and other entrepreneurs, acting as a game-changer to propel their businesses to higher orbits.
Funding travel costs: Those smitten by wanderlust but hampered by low bank balances can use an instant PL to fund their airfare, accommodation and allied travel-linked expenses. Thereby, people can go on their dream vacation without bothering unduly about insufficient funds. Easy repayment options on the PL also ensure the EMIs can be staggered as per mutual convenience.
The above are some of the multiple benefits that accrue through an instant PL. But borrowers should remember that paying EMIs on time is essential to ensure they keep enjoying the benefits of being a responsible, creditworthy borrower.
Gaurav Jalan, CEO & Founder, mPokket