From constructing a home to consolidating high-interest debts, personal loans are a quick and easy way to reach life milestones without the burden of having a long term financial obligation. Unsecured personal loans are different from secured personal loans as the former does not offer any form of collateral in case the borrower defaults on their payment. However, just as there are personal loan interest rates and EMIs on one’s secured loans, so is the case with unsecured personal loans?
It is recommended to pay off one’s loans as quickly as possible in fewer installments. Similar to knowing one’s EMIs for a secured loan, one can use a personal loan EMI calculator before taking out a loan to see the amount they require that can be sustainably paid off in the form of monthly EMIs. Here is a guide to unsecured personal loans.
Why Do People Opt For Unsecured Personal Loans?
In addition to the aforementioned debt consolidation and home renovation, here are some more reasons why people take out personal loans:
- Business: Developing a business, buying business space, reconstructing an old office, buying machinery related to one’s business, and more.
- Travel: To fund one’s travels including buying airline tickets, hotel bookings, tour bookings, and having cash to spend on the trip itself.
- Car financing: One can take a personal loan simply for buying a new car. However, second-hand cars require care in the form of maintenance, servicing, and occasional repair. A loan can also be used for this.
- Refinancing a credit card: If one has exceeded one’s credit limit, and exhausted their opportunity to make new purchases, unsecured loans can be taken to the extent that one responsibly pays off their credit card debt through the loan.
Who is Eligible for an Unsecured Personal Loan?
Many measures are in place so one can show their track record when it comes to paying off any borrowed funds. The main metric is known as CIBIL score, which is a measure of how effectively one has paid off any past loans or debt. A higher CIBIL score is considered healthier while a low score indicates financial irresponsibility when it comes to loan repayment. If a candidate has a somewhat low CIBIL score that barely meets the criteria for ‘good,’ it can be difficult to receive unsecured personal loans.
If they do receive them, the personal loan interest rates may be quite high. This is a way for the bank to prepare themselves in case the borrower defaults on their payments. Other factors that affect your personal loan interest rates are the loan type you choose, the amount borrowed, and the lender you choose. This is why using a personal loan EMI calculator on different lender websites can prove so helpful. A personal loan EMI calculator can give a clear idea of how much your EMIs will be with one lender versus another, particularly when personal loan interest rates vary. Ensure you compare lenders by using personal loan EMI calculators.
Personal loans are ideal for funding important life milestones that require hefty finances — be it starting a business, getting married, traveling, or simply paying off debt. Ensure you choose a loan provider that offers low personal loan interest rates. You also want flexibility in the amount you borrow.