Why are personal loans a convenient solution during financial crises? Here are 6 key reasons | Mint

Personal loans can be a vital resource during financial emergencies, offering numerous benefits that make them an attractive option for those in need. They provide quick access to funds and a lump sum that can help borrowers manage unexpected expenses. 

Here are several compelling reasons to consider an instant personal loan during a financial crisis:

Easy accessibility and quick relief

One of the standout features of personal loans is their accessibility. They often require minimal documentation, making the approval process straightforward and less burdensome.

As noted by Prithvi Chandrasekhar, CEO of Consumer Finance at InCred Finance: “There are less requirements of resources to obtain these loans. They are less tiring and require minimal documentation for approval. Self-employed loan applicants are generally required to provide business proofs, such as proof of GST registration and active transactions. This serves a similar purpose to salary verification, convincing the lender that the customer can repay the loan. If these proofs are not provided, the loan is likely to be rejected.”

Rapid fund access

In emergencies, personal loans can act as lifesavers. They provide rapid access to funds with quick approval processes, allowing borrowers to meet urgent financial obligations without relying on others.

Flexibility in spending

Personal loans offer borrowers the freedom to use the funds as needed. Whether it’s for medical emergencies, home renovations, or debt consolidation, the flexibility of these loans makes them suitable for a variety of purposes. Unlike education or business loans, which are often restricted to specific uses, personal loans can cover almost any financial need.

Predictable monthly payments

Predictable monthly payments make personal loans an attractive option for many borrowers. Interest rates typically range from 9.99% to 44% per annum, depending on factors such as the loan amount, your credit score, and the repayment tenure. 

This stability ensures that monthly payments remain consistent throughout the loan term, making financial planning easier. Borrowers can accurately calculate their monthly expenses without the concern of fluctuating interest rates, which is often a risk with credit cards.

Debt consolidation

Another significant advantage of personal loans is their ability to consolidate existing debts. By taking out a personal loan, borrowers can pay off multiple smaller loans and replace them with a single, more manageable monthly payment. This simplification can reduce stress and make repayment more straightforward.

Securing your future

Emergencies can arise unexpectedly, and being financially prepared can help mitigate stress. Personal loans can provide the necessary funds to navigate challenging situations, allowing borrowers to face difficulties with greater confidence.

Conclusion

Financial challenges can take a toll on your mental and emotional well-being. It is wise to prepare for such scenarios, and personal loans can be an effective way to manage your finances during tough times.

While personal loans offer many benefits, it’s essential to be aware of potential pitfalls, such as high interest rates. Conduct thorough research before applying for a loan, and consider borrowing only the amount you truly need to minimise future financial burdens.