Are taking personal loans reliable?

One key aspect of proper financial management is to ensure that you have funds available in case of emergencies. However, maintaining a large amount in your emergency fundsaccount is not always possible. Since, keeping a huge amount locked up in an unproductive account is inherently unwise, you might prefer investing your savings in either real estate or stocks or other such long term investment schemes. As such, you are left with a risk of not having enough funds to meet emergency situations. Though credit cards can come to your aid, they are inherently expensive. In such a situation, availing aninstant loanmay be the most feasible option for you.

Not only personal loans have lower interest rates than credit cards, they are also much easier to avail and repay. All you need is a digital copy of the necessary documents and you can easily apply for an instant loan through a loan app from the comfort of your home. A loan app also allows you to compare the different loan offers, check your eligibility and predict the EMI through an online loan calculator.

There are a number of reasons why you can trust a personal loan to help you handle a financial emergency.

5 Reasons that make personal loans the most reliable financial instrument

1. Personal loan is available almost immediately

This is one of the key factors that make a personal loan an extremely reliable way to manage funds in case of emergency. The times when processing a personal loan took months are gone. Today the processing time for a loan is reduced to a matter of hours. With a loan app,theentire process of processing your loan is digitalized.

From submitting your loan application and documents online to verifying your details through advanced machine learning and AI, the entire process is completed within minutes. There are no chances of delays or errors due to human intervention. As such, if you fulfil all the required criteria and you have submitted all the necessary documents correctly, then the loan amount would be credited into your account directly within 24 to 48 hours.

2. Personal loan is not restrictive:

One feature that makes an instant loana highly reliable choice in case of emergency is the flexible usability of a personal loan amount. Unlike any other loans, in case of a personal loan you can use the loan amount in any way that suits your needs.Once you fulfil all the requirements stated by the lender, the loan amount gets credited into your account and you do not have to provide a breakdown of your end use to the lender.

Whether you opt for a personal loan from a conventional lender or a personal loanapp, you get the end-use flexibility with your loan.This helps you take care of all the big and small expenses that come with an emergency like medical situation, home renovation, and wedding or travel aspirations.

3. Personal loan does not require any collateral

Another key reason why personal loan can be a highly reliable source of funds in case of financial emergency is that you can get a personal loan from a loan without having to submit any kind of collateral or security. Being an unsecured debt the lender offers you a personal loan on trust basis.

The lender would check your previous track record of repayment. They would check your credit score and analyse the risk factor associated with your loan account. In case, you have a fair credit score and you have the capacity to handle your loan EMI with your monthly income your lender would offer you the loan amount without asking for any collateral.

4. Personal loan requires very simple documentation

One big advantage that a personal loan brings is the need of very simple documentation. When applyingfor a personal loan, you have to submit a very few documents related to your identity, address and income. These documents are very easy to furnish. Since, a personal loan does not need any collateral you do not have to go through the hardships of submitting the documents related to your asset.

In case you choose to apply for a personal loan through a loan app then you can submit a digital copy of your documents which include your Aadhar card, PAN card, address proof, salary slips or income tax returns. The document requirement may vary from lender to lender and you must check their requirements before applying for the loan. In case of a failure in furnishing the documents, your loan application might get rejected.

5. Personal loan can be repaid in a very short span of time:

Generally, people take personal loans only for a year or two. Though you can opt for a longer duration, but keeping it short is always advised. Shorter loan duration means you can be debt free within a year or two. Also, having a shorter duration means reduced interest pay outs and eligibility to borrow more in the future. However, it is important to ensure that you opt for a tenure that makes your loan EMI affordable.

Also, while planning your repayment you must consider keeping 2 to 3 months of your loan EMI as security in case of an unforeseen event like job loss or health crisis. This will help you avoid missing out on EMIs in case of a financial hardship.

Conclusion

Funding an emergency using a personal loan is very effective way to manage finances.Keeping a huge sum of money in your regular account in anticipation of an emergency situation makes no sense. Also, pulling out your investments in the time of an emergency may turn out to be time consuming as well as expensive. As such, a personal loan stands as a great option for you to meet your financial needs.