Interest free personal loans: From benefits to eligibility; all you need to know | Mint

Life has a funny way of throwing unexpected expenses at you. It may be in the form of a hospital bill, an essential house repair, or some academic expenditure. Under these conditions, you would be bound to look for urgent help with money. The main drawback of a conventional personal loan is the rate of interest, which will enlarge your payback to unrealistic proportions. It is from this reason that interest-free personal loans have become extremely popular.

What are interest-free personal loans?

These interest-free personal loans, also called zero-interest loans, add no extra charge. You just pay back what you borrowed. To people who need financial help, these loans seem to be a good option. They get rid of the extra costs that come with regular loans.

Are these personal loans really interest free?

Depending on the lender, however, this term “interest-free” is not at all times true. In fact, for the reasons explained below:

Drawbacks of interest free personal loans

• Reduced financial stress: You will have a low credit score but also increased financial stress in case you fail to pay on time. This can even lower your credibility and the future prospects of borrowing.
• Limited use: There are limited options because usually, these loans are connected to specific goods or services. Some of them have serious eligibility conditions like interest-free loans by the government.

Who qualifies for interest free personal loans?

Lenders have different eligibility criteria, however, common ones are;

• Age: They must normally be between 21 years and 65.
• Identity proof: You will need to provide a PAN card, Aadhaar, or any other government-issued identity proof.

What minimum credit score is required for interest free personal loans?

To qualify for an interest-free loan, you need to have a high credit score, often between 700 and 900. Lenders want applicants to have a high credit profile very often since they are taking a risk in not charging interest rate.

In conclusion, although interest-free personal loans might seem like the best possible solution for one-off spending, one must read the fine print. Some organizations, religious or charity ones, might genuinely provide interest-free loans in order to help their communities; however, others may have restrictive restrictions or costs that are well hidden to outweigh the benefits.

(Note: Raising a loan comes with its own risks. So, due caution is advised)