Personal Loan In Emergencies

personal loan emergencies

Personal Loans are considered to be the most hassle free category of loans. They are short term usually for a duration of one year and need minimum documentation. Their speedy disbursal and quick processing make them perfect for emergencies. However we still do not find a lot of people opting for them. In this article we will explore the pros and cons of personal loans in detail and reasons why they should be picked only as last resort or in emergencies when funds are required almost immediately and there is no other option.


To understand why personal loans are so popular, let us give you the advantages of this category in detail.

Flexibility of use: The best feature of Personal loans is that the lender is only interested in timely repayment of loan and not the purpose to which you are putting it. You could use it to buy household goods or fund your next vacation. If you have been unable to get business loan for your new venture and the need of funds is vital and immediate then personal loan can come to your rescue. So one personal loan can be put to just about any use without questions being asked!

Easy access: Personal loans are probably the easiest to get because of easy access. If you have a decently long relationship with your bank then it becomes all the more accessible. These days it is common to get pre-approved personal loans whose amount is determined by your financial history with the lender (bank). Pre-approved loan here means that the lender would get in touch with you and ask if you need personal loan. If you say yes, then the disbursal is almost immediate!

Interest rate is lower than Credit card borrowings: Now there are a lot of people who tend to advocate use of credit card instead of personal loan. After all both are for short term and unsecured in nature. Right? Wrong on both fronts! Now credit card does allow you to have a stop gap arrangement but it is available for free only until the due date of payment. So your longest credit period would be one month whereas personal loan will give you one year though EMIs would start after a month but EMIs are of course really small as compared to the loan amount. Secondly the penalty, late payment and interest charges on Credit cards are super hefty and this is why it happens to be a costly deal. When you need a big amount over a longer period of time (over one month), it is safer to go for personal loan.

Quick availability: Personal loans have an easy and very quick availability and this is one feature and advantage that makes personal loans so popular. Since the interest rates are higher than other category of loans, banks are very happy to extend personal loans to regular clients or borrowers with established financial credibility.

Minimal documentation required: If you are already a long standing client, your bank may not ask you for any documents since they have all of them in their custody already. In most of the cases, just an identification and address proof is sufficient. No collateral, guarantor or other plethora of proofs are needed to avail personal loans.

No collateral or security needed: As mentioned in the point above, personal loans are unsecured short term loans. This makes them perfect for borrowers who do not own any property or possession that can be mortgaged. Unlike other loans you do not have to arrange for a guarantor who is liable to repay the loan in case the primary borrower fails to service the loan repayment.


Now that we have discussed advantages of the personal loans, let us look at the other side of the coin as well. There are four main disadvantages that we are discussing below that make personal loans an option that is ideal only in emergencies.

High interest rates: Though the rate of interest on Personal loan is lower than the interest on credit card dues but it is way too costly as compared to other category of loans like business loans, home loans, vehicle loan etc. This is why most of the people go for personal loans only in emergencies when funds are required immediately and they are not able to secure loans under any other category.

Other charges: Apart from high rate of interest, personal loans also carry exorbitant charges in case of defaults or delays. Make sure you are familiar with the different types of charges that are being levied. Apart from these usual charges, ascertain and check specifically for swapping charges, cheque bounce charges, service and processing fee. All of these together can make your loan really costly. Familiarisation will also help you in avoiding any defaults that will activate such charges.

No part payments: Most of the personal loans cannot be cleared prematurely or by bulk one time payments. Either it is out rightly prohibited or a hefty prepayment charge is levied in case of prepayments. This can create a debt trap for individuals who have no visibility or reliability of future cash flows.

Variable loan and interest : Since banks and lenders have their own rules and regulations when it comes to personal loans, the interest rates and other terms and conditions can vary widely from borrower to borrower. Even the interest rate and loan amount might depend on your credit rating. Lower the credit rating, higher the interest and vice versa.

So these were the various advantages and disadvantages of personal loans and each individual should take an informed decision on availing personal loan based on facts. Do visit us on letzbank to explore different options under various categories of loan. We bring the best names of lending industry under one roof on our portal. The comparative display can help you in quick evaluation of your options. Our eligibility checker can assist you in arriving at the amount you can secure under each loan category. So visit us today, and whatever be the need, we just have the right loan for you!

Main Category: Loans