What is a Personal Loan and what are its Types?
The meaning of a personal loan is the amount of money that banks will lend to you, so that you can meet your expenses. It is also called a consumer loan that you can use to meet your pressing financial needs.
You can take a personal loan to repay a debt or celebrate your daughter’s wedding. Alternatively, you could use it for home renovations.
Apart from banks, online lenders and financial institutions also offer personal loans. You must repay the loan amount within the timeframe set by the lender plus interest.
You can take such a loan in the following situations:
§ Moving house expenses
§ Medical bills
§ Holiday expenses
§ Emergencies, among many others
Key Features of a Personal Loan
The features of a personal loan are as follows:
§ It is an unsecured loan, so it does not require collateral.
§ The loan is based on your income level, credit history, employment track record, repayment ability, and profession.
§ The bank can process the loan quickly.
§ You can obtain a loan from your bank or any non-banking financial institution.
§ Your loan amount will be with you within 48 hours of application.
§ You can get a personal loan at an attractive interest rate. If you are an existing customer with a good CIBIL score, the bank will also add some benefits to your loan.
§ The loan tenure ranges from 1 year to 5 years, with easy options to repay in EMIs.
Types of Personal Loans
You can have many reasons to apply for a personal loan. The meaning of a personal loan is quite simple: You could be planning to renovate your home, host a wedding or reconcile a debt. This type of loan helps you when you don’t have immediate liquidity.
Personal loans are of the following types:
Education loan
Students can obtain secured education loans or unsecured personal loans to fund their tuition, hostel fees, and other academic expenses.In the context of a student’s life, this is the meaning of a personal loan.
Generally, a personal loan of Rs. 20 lakhs is given, which the student must repay in 5 or 6 years.
Wedding loan
If it’s wedding time in your family and you’re short of funds, you will surely understand thesignificance or meaning of a personal loan. Every parent wants to host a lavish wedding for their son or daughter.
To make this possible, parents take out large personal loans. These loans have a maximum loan amount of Rs. 25 lakhs and must be repaid within 3 months to 6 years.
If your need is smaller, go in for a Rs 10 lakh personal loan EMI.
Festival loan
Everyone wants to be a part of grand festival celebrations, whether it be Holi, Dussehra, Diwali, Eid, or Christmas. Perhaps, your savings aren’t enough to fuel your expenses at this time.
Don’t worry. With banks and other lenders ready to give you a festival loan not exceeding Rs. 50,000, you can have a grand celebration.
Medical emergency loan
The most unexpected emergencies are those that relate to your health. They appear out of nowhere and catch you completely off guard. The severity of your condition plus the cost of medical treatment in hospitals can drain your coffers very soon.
Now is the time to truly comprehend the meaning of a personal loan. This can take the form of a medical emergency loan. If you meet the eligibility standards of the bank and have a good CIBIL score, you can get a personal loan for up to Rs. 25 lakhs to repay within 6 years.
Debt consolidation loan
If you’re trying to repay a loan but cannot meet the lender’s expectations, it might be a good idea to take a personal loan to finish paying your debt. Once you fully understand the meaning of a personal loan, you can take one.
Usually, you can get a personal loan whose interest rates hover between 10% and 15% p.a. So, you can pay it comfortably within the stipulated period.
Travel loan
A holiday for the entire family abroad does sound like an expensive proposition. But if you’ve promised them this holiday, you’ll have to live up to it. Sure, it’s an expensive holiday, but you can plan your trip with a personal loan.
Often, if you avail yourself of a travel loan, your lender will throw in complimentary travel insurance. The maximum loan amount a bank will give you is Rs. 40 lakhs, which you must repay in 6 years.
Home renovation loan
What if you need money urgently for home repairs? Speak to your bank for a home renovation loan. This personal loan will help you tide over your home repair expenses.
You can expect no more than Rs. 40 lakhs for it. Your tenure for repayment cannot exceed 3 years.
Conclusion
We hope you found this article on understanding the meaning of a personal loan helpful and informative. Whether you want to consolidate debt, make a large purchase, or be prepared for an unexpected expense, you’ll always find a personal loan to suit your needs.
However, remember to compare offers from several lenders to get the best interest rates and terms for your loan.
For expert advice in personal finance, consider getting in touch with Piramal Finance. You’ll get the best advice on personal loans, and you can also see their range of products.