A personal loan is not just a blessing for those in immediate need of funds but also a vital financial product to increase liquidity in the market. If taken and used wisely, repayment is planned accordingly, and taking low-interest personal loans can assist you. Unlike the notion that taking a personal loan improves your debt burden.
So, read on further to know how personal loan benefits can help you cover your financial needs.
A personal loan is a form of credit. It is unlike credit cards, a loan from mortgages, short-term finances or hand loans, etc. When each type of credit has a specific purpose, you can use a personal loan for any financial requirement. You can use an online personal loan from Buddy Loan to pay off a mortgage loan, consolidate your debt, use it for travel expenses, buy a vehicle, cover medical emergencies, wedding expenses, home renovation, business expansion, etc.
Major Personal Loan Benefits You Need To Know!
The following information discusses major personal loan benefits:
Personal Loans can be a good debt!
All debts are not bad. Debt becomes good when you avail of a personal loan for an investment, venture, or business expansion. It is because debt creates opportunities and creates professional or business inertia. Without proper liability, people, businesses, and corporations would be at a standstill. Moreover, getting an instant personal loan from Buddy Loan is more accessible than in most places.
Cover any financial need
A personal loan is a broad category to refer to several sub-loans. Some of them, namely travel loans, educational loans, home renovation loans, loans against two-wheelers, medical loans, and so on. There are so many types of personal loans to fulfill the funding or expenditure needs of every aspect of a person, professional, or business.
Competitive Interest Rates
Most personal loans are short-term credit at interest rates starting at 11.99% p.a. These interest rates are set depending on factors such as the amount of loan, credit history, secured/unsecured loan, credit score, purpose, etc. However, personal loans win hands-down when comparing these interest rates to credit card interest rates. Being primarily unsecured loans, regular personal loan borrowers with a good repayment track record can even be offered low rates.
No worries about a bad credit score
Only some have a good credit score. But that does not mean they are doomed and cannot get a personal loan. Innumerable banks and non-banking financial corporations offer personal loans to those with low credit ratings if you prove to be credible. While some want a higher credit score, others can do it with a nominal one. Therefore, a personal loan is an excellent alternative to come out of credit card debt fast and start on a sound footing.
Collateral Free with minimum documentation
Being an unsecured loan, you need not pledge any collateral to avail of a personal loan. And with minimum documents, you get your loan approved instantly. You need not waste time visiting the banks as the loan application process is online, making it convenient to access.
Tax Benefits on Personal Loan
3 Circumstances You Can Get Personal Loan Income Tax Benefits are:
Availing of a Personal Loan For Business Needs:
You can use a personal loan for your business requirements, such as expanding your business or launching your startup. And when you avail of a personal loan for your business, the interest rates will be considered a liability for the business. Hence, the interest you pay will be taken as an expense deducted from the net profit of your business. As a result, it will reduce the total amount that will be included for tax on your net profit. Moreover, the law under Income Tax Act does not set any limit on the tax-deductible amount on liabilities of your business. Therefore, the whole interest that you pay will be tax-deductible if you use it for business.
Availing of a Personal Loan for Home Renovation:
As per Section 24 of the Income Tax Act, titled “Deductions from Income from House Property,” you can claim income tax benefits on your house property. And when you avail of a personal loan for your home renovation, the interest you pay can be deducted from the net income of your residential property. However, Section 24 of the Income Tax Act is applicable only if you use the loan amount for purchasing, constructing, or renovating the house. Since the Act does not specify the type of loan, personal loans are also eligible for a tax deduction. And when claiming you have to submit the required documents and mention the usage of the loan amount. Moreover, you can claim a tax benefit of up to INR 2 Lakhs on the interest rate if you occupy the house.
Availing of A Personal Loan For Purchasing Assets:
When you avail of a personal loan to purchase assets like jewellery, shares, or other non-residential materials, the interest you pay will be added to the total cost. And you cannot claim tax deduction immediately. However, if you sell that asset in the future, the interest you pay will also be deducted from the net profit and reduced as a part of the cost of acquisition which will in turn reduce the taxable income.
Not just this, you can also get additional benefits of personal loan from other aspects to cover your needs. Let us have a look at how availing of a personal loan can benefit you additionally.
Additional Benefits of A Personal Loan
Personal loans are a life-saver in many situations as they offer various solutions for pressing financial needs. The range of uses of a personal loan is vast, be it working capital in the form of SME business loans, travel expenses, business expansion funds in the form of an unsecured business loan online, or personal credit such as a bank loan for medical treatment. The following information discusses additional personal loan benefits that you can get.
Credit Card Debt Consolidation
Using several credit cards can increase your debt on all of these cards if you are unable to repay on time. Outstanding balances on several credit cards could go undetected by the cardholder. You can clear all the outstanding amounts on your credit cards by taking a personal loan.
Home Renovation or Reconstruction
Home improvement loans are a particular type of personal loan that provides funds to refurbish a home. There is no need to go through the lengthy process of checking housing loan eligibility. It is unlike the process of applying for a home loan. The funds can be used to expand the home premises, renovate, increase the home’s safety, etc. Home renovation loans enjoy nominal interest rates as a hybrid between the best housing loan product and a personal loan.
Gone are the days when money for planning a wedding was a significant concern. It would involve lengthy bank procedures and waiting periods. The fast application process, accessible documentation, and fast disbursal make these loans a go-to source of funds for those planning a wedding.
Purchase Dream Vehicle
You can purchase your dream two-wheeler with an instant personal loan in hours. There is no discretion on the vehicle cost – these are the times of instant bike loan online products. But banks and non-banking financial institutions are more than willing to lend the loan. No more waiting for the right time to buy that dream car or bike. The time is right here, right now!
Business Personal Loan
Capital is the prime word that comes into discussions when starting a business. It could be in the form of start-up capital to set the ball rolling or working capital to keep the business continuity. Several other reasons a business or entrepreneur can benefit from a personal loan. The funds can be used to purchase equipment, pay for office space, purchase raw materials, etc. Given the vast number of users who need a personal loan, if one is looking for immediate funds, then look no further than a personal loan by Buddy Loan.
Read more: Tax Exemptions With Personal Loan!
Personal Loan Prepayment Benefits
You can choose to prepay a part of your personal loan in advance when you have sufficient money. Here are some of the benefits of prepaying your personal loan:
Having debt can eat up a part of your monthly income as you have to pay interest till your loan tenure. And you can reduce the debt burden by prepaying your loan amount when you have sufficient money. However, lenders will add additional charges when you prepay your personal loan.
Reducing the outflow of interest
Before you choose to prepay your personal loan, lenders usually impose a lock-in period where you are not allowed to prepay your loan fully or partially. Once you cross this period, you can prepay your loan. This will reduce the amount of interest you will pay until the end of your tenure.
A Positive Result on Credit Score
When you prepay your personal loan, you are not only reducing your debt burden but also improving your credibility. The reason is that outstanding or pending debts damage your credit score and when you prepay your loan amount, it increases your credit score considerably. Therefore, it has a positive impact on your credit score.
With that being said, if you are planning to avail yourself of a personal loan, you must also be aware of how it can have an impact on your credit score. The below points will give you clarity, so read on!
Impact of Personal Loan on Credit Score
Taking a personal loan can be a good thing to clear your debts, but it significantly impacts your credit score, depending on your repayment track. So here are some scenarios of how your credit score may get affected:
- An application for a personal loan gets rejected:
The reason for rejection is recorded and sent to the credit bureau. Therefore, applicants must be sure before applying for a personal loan. It is recommended that they check their eligibility, read the terms & conditions of the loan, and make an informed application for their urgent medical loan or gold loan bank credit, etc.
- Repayment behavior:On-time repayments improve credit score. Even a single lapse in the repayment schedule can affect your credit ratings.
- Debt consolidation:
Credit ratings improve when all debt from different loans or credit cards is consolidated into a single loan. When a person or business only has a single loan to repay, their credit ratings improve as opposed to having multiple loans.
Now, you must also remember that your payment history has a major influence on your credit score! So repaying your personal loan must be taken care of! Here are ways you can plan your personal loan repayment without hassle.
Also Read: How Late Payments Affect Your CIBIL Score?
Personal Loan Repayment
Understanding how to repay a personal loan goes a long way in efficiently managing your debt. It protects your hard-earned money, saves valuable time, reduces financial obligations, improves your credit score, and makes you financially stable.
Here are some ways you can plan a personal Loan repayment:
Use Savings To Repay The Loan!
Savings can repay outstanding debt. It is an effective way to reduce the debt burden. Using savings to repay loans is never old-fashioned. When taking an online personal loan, if one is prepared to repay the loan using one’s savings, then prepare for a financially stable future! Apply for a business loan, a home loan, check for second-hand bike finance – do all this without worrying about repaying it if every month’s savings are anticipated.
Many loans can be consolidated into a single loan. Taking one personal loan that repays off all other loans is akin to consolidating debt. So if someone has an existing instant medical loan, home finance product, and small business loans – all of these can be consolidated into a single loan,
Reducing Loan Tenure
The longer the tenure, the more the interest paid and the risk. Although the EMI could be smaller than short-tenure personal loans, it is always advisable to go for short-tenure loans. So consider reducing the loan tenure if anticipated profits or savings are substantial enough to make consistent repayments. With this approach, whatever the type of loan – personal loan for a vacation, unsecured medical loan, or loan on gold – one can expect to save more than lose money on interest repayments.
Taking a personal loan product with a reduced interest rate is an ideal way to slowly decrease the debt burden over time by making part-payments. When a part payment is made, interest is charged only on the outstanding principal. EMIs are recalibrated, and a new EMI schedule is generated. So many loan products offer such schemes – gold loan on Sunday bonanza products, best car loans, or urgent medical loan products – there is a wide variety to choose from on Buddy Loan.
Foreclosing The Loan
When a surplus or lump-sum corpus of money is expected, completely foreclosing the loan reduces the debt burden to zero. It also improves credit ratings and makes obtaining more personal loan products from various banks viable.
Read More: A Guide to Managing Personal Loan Repayment
This article shows how a personal loan can benefit you in many ways. Be it debt consolidation, covering your financial needs, or improving your credit score, a personal loan acts as a boon. However, you must make sure you repay your loan amount on time to avoid damaging your credit score. Also, remember to check your credit score regularly and maintain it above 750 to easily qualify for a personal loan. You can also check your credit score using Buddy Score and get an instant credit report to keep a track of your credit health.
So if you are looking for a personal loan, Buddy Loan is the right platform. It is one of the largest loan aggregators that help you get a personal loan at affordable rates. All you have to do is Check eligibility with the bank. Fill out the online form. Furnish details such as income, PAN card, years in service, etc. Wait for an intimation from the bank. The bank checks your creditworthiness and informs you of the amount of loan that can be disbursed. More the creditworthiness more is the amount of loan disbursed.
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