Personal loans have got numerous benefits and also many drawbacks as well. Personal loans can be used for any purpose according to the choice of the borrower. The lender does not ask for any proof for the expenditure of the loan amount taken. The borrower can avail of loans from any of the lenders of their choice. The interest rates being charged vary according to the lender; there is a drastic difference in personal loans interest rates being charged. Banks start taking installments from the subsequent month from the borrower as soon as the loan is being taken. Banks charge a heavy penalty to the borrowers in case of the delay or default of the personal loans. Also, the credit score of an individual may fall down due to delay or default of loans. Thus it is recommended that the borrower should repay the installments on time to the lender. Personal loans can be obtained with minimal documentation, and also the process of approval of the loans is speedy compared to any other type of loan. The interest rates being charged are 9-24% per annum to the borrower by the banks.

The borrower should choose the lender wisely by surveying the terms & conditions of the lender and also survey the interest rates charged by various banks. It can be a heavy loss to the borrower if they agree to the higher interest rates as the repayment value may increase drastically due to higher interest rates. The tenure for the personal loans is usually five years. The borrower can even opt for lower tenure while applying for the loans to become early debt-free. The banks also charge processing fees to the borrower while approving loans. Some banks also charge a pre-payment penalty in case of repaying the loans early. Thus the borrowers should be careful about the penalty charges, whether applied or not by the lender. The loans can be utilized for marriage purposes, medical purposes, fund a child’s education, renovation of the property, or travel purposes. The funds are processed within 48 hours in the offline mode and within a few hours in the case of online mode. The banks approve loans of only those customers whose CIBIL score is at least above 700 points, without which banks usually do not approve loans.

Following are the benefits of the personal loans:

• The process of approval is quick in the case of personal loans. Banks usually approve loans within 48 hours in offline mode and within few hours in case of online mode.
• Bank does not ask for any proof of expenditure after disbursement of loans as the borrower is free to utilize the funds for any purpose.
• Banks approve loans in case of minimal documents.
• Banks may sometimes approve the loans even in case of a low CIBIL score, but with higher interest rates being charged.
• A personal loan is a multi-purpose loan and thus can be utilized for any purpose or multiple purposes.
• Personal loans help boost the markets as in lower savings; also, people get higher purchasing capacity to buy goods or spend money on more considerable expenses through personal loans.
• The term for repayment is higher, five years from the date on which the loan is being taken.

Following are the Cons of personal loans:

• The interest rates being charged are higher as compared to home loans or any other type of loan. The interest being charged is as high as 30% per annum.
• No tax benefit is provided on the income tax for personal loans.
• Personal loans are also charged with a penalty in case of early repayment of loans.

Conclusion:

Thus the personal loans have higher benefits as compared to drawbacks. Therefore, the borrower opts for personal loans with optimum amount only to limit the burden and liability of loans on the borrower. And the CIBIL records should be maintained well in case of applying for the loans.