3 min read Feb 26, 2024
You can use Personal Loans for a variety of reasons, such as a holiday, renovating your home, wedding expenses, buying the latest mobile phone, a medical emergency, etc. These loans are collateral-free and come with quick approvals if you meet the lender’s eligibility criteria and furnish the required documents.
However, the use of Personal Loan should be judicious. While you should not delay or default on EMI payments, the reasons to use a Personal Loan should be compelling as you are borrowing that money from an institution.
How Personal Loan Works
Personal Loan offers a lump sum amount that can be repaid in fixed monthly instalments over a defined period. Whether the interest is fixed or variable depends on the loan terms. Before taking a Personal Loan, assess your fund requirements meticulously and take only as much as you need. Also, make timely repayments, ensuring the EMIs are not delayed.
What can I use a Personal Loan for?
While there is a lot of flexibility on how to use a Personal Loan, it cannot be for gambling or speculative ventures as that may be prohibited under the Personal Loan terms and conditions.
Here are some purposes for which you can use your loan.
Consolidation of Existing Debt
- One significant use of Personal Loan can be the consolidation of high-interest debts into a single, more manageable payment.
- If you have multiple loans, it may become costly and cumbersome to make regular EMI payments for each of them.
- Avail a Personal Loan and pay off some or all the loans, which can simplify your loan payments and potentially reduce overall interest costs.
Medical Bills
- Raising funds for medical emergencies is another compelling reasons to use a Personal Loan.
- Whether it's for emergency procedures, medical treatments, or health-related costs, a Personal Loan offers a flexible solution to cover immediate healthcare needs without compromising your financial stability.
House Renovation or Improvement
- A Personal Loan can be used for a home renovation and improvement project.
- Whether you want to add a new room, upgrade the kitchen, or lay a new roof, a Personal Loan can help you with the necessary funds.
- Ensure the loan meets your goals and enhances the value of your home.
Unexpected Expenses
- Personal Loans can serve as a safety net for unforeseen personal finance needs.
- Whether it's a car repair, appliance replacement, or other unexpected costs, a Personal Loan offers quick access to funds when you need them most.
Large Purchases
- When faced with significant expenses like buying new furniture, appliances, or electronic devices, a Personal Loan can provide the necessary funds.
- Using a Personal Loan, you can make the purchase immediately and repay the loan over time.
Moving Costs
- Relocating can be costly, but a Personal Loan can ease the financial burden of moving expenses.
- Whether it's hiring movers, covering transportation costs, or settling into a new place, a Personal Loan provides financial support during the transition.
Tax Debt
- Unpaid taxes can have serious consequences and a Personal Loan can provide a way out if you are faced with such a situation.
- A Personal Loan allows you to pay off tax debts over time, preventing financial strain and potential penalties.
What Personal Loans shouldn’t be used for?
While Personal Loans can be used for any legitimate reason, in some cases you may have a more specific loan product with distinct advantages. In some cases, the use of a Personal Loan is not the best option. Let’s consider these examples:
College Tuition
Personal Loans are not the ideal choice for funding college tuition due to typically higher interest rate than Education Loans. Instead, you should explore student loans, scholarships, or grants designed specifically for educational expenses, providing more favourable terms and repayment options suited to student's financial circ*mstances. However, if you are a parent funding your kids’ education, you may avail personal loan as it can help pay education related fees as well as deal with other expenses that come along as a kid goes to college.
Business Expenses
Personal Loans are not intended for business-related costs. Businesses should consider specialised business loans, lines of credit, or other financing options designed to meet the unique financial requirements of business operations. These financial solutions may offer more favourable terms and appropriate funding solutions.
What credit score do I need for a Personal Loan?
To secure favourable Personal Loan terms, strive for a good to excellent credit score. Lenders often offer better rates to borrowers with higher creditworthiness. For example, Axis Bank requires CIBIL score in the range of 720-750 for an applicant to be eligible for a Personal Loan.
Boost your credit before applying for a Personal Loan
If your credit score is a worry, take time to improve it. You can enhance your credit score by managing existing debts, paying bills punctually, and addressing discrepancies in your credit report. A higher credit score increases your chances of loan approval and may lead to lower interest rates.
Axis Bank Personal Loan
Axis Bank Personal Loan provides flexible and convenient financing to fulfil your diverse personal finance needs. Access loan amounts ranging from ₹50,000 to ₹40 lakh and choose a repayment tenure of 12 to 84 months to align with your budget.
Competitive interest rates starting at 10.65% p.a. ensure cost-effectiveness, making Axis Bank an attractive option for various financial goals – from dream vacations and unexpected medical expenses to essential home repairs.
Also Read: Choosing the right Personal Loan for your needs
Key Features
- Apply online for quick approval within 30 seconds, minimising paperwork and hassle.
- Benefit from competitive interest rates for affordable financing.
- Choose a repayment tenure (12-84 months) that fits your budget and preferences.
- Enjoy clear and upfront loan terms, free from hidden costs or fees.
- Consolidate existing high-interest Personal Loans with Axis Bank for lower EMIs, simplifying your finances.
Eligibility and Documentation
- Salaried Individuals: Applicants must be between 21 and 60 years old at loan maturity.
- Minimum Income: Possess a minimum net monthly income of ₹15,000.
- Required Documents: Submit the last 3 months' bank statements, 3 latest salary slips with Form 16, and KYC documents (PAN card, Aadhaar card, etc.).
In essence, a personal loan serves as a financial tool that swiftly provides you with the necessary funds when unexpected expenses arise or when you're in need of immediate cash. The availability of a loan without the necessity for collateral can greatly simplify your financial planning and address urgent needs without added stress.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
