Personal loans give access to quick money at times of urgent financial needs. Be it your daughter’s wedding, a medical emergency, or a house renovation, personal loan is a one stop solution. Personal loans are availed for all your personal requirements and you need not disclose the end use of the loan to the lender. Thus personal loans are also referred as all purpose loans. Personal loans are unsecured in nature i.e. there is no requirement for security, guarantor or hypothecation of assets. Thus a lender takes a risk availing this loan.
Though he charges high rate of interest to compensate the risk involved, lenders are always at a backseat availing this loan. This is because in case of secured loan, inability to pay the loan amount allows banks or lenders to repossess the asset held as security. However since personal loans are unsecured there is no hypothecation of assets.
Personal loan interest rates are high compared to any other secured loan. Thus instead of it proving a helpful option it can easily turn into a costly affair. Thus it is important to understand personal loan complexities before availing one.
A home renovation loan offered by few banks like SBI would be a viable and rational option compared to personal loan for a simple reason that SBI’s home renovation loan is offered taking into consideration the normal renovation cost and accordingly the tenure is set. Even the interest rate would be lower compared to personal loan. A top up loan on existing home loan would also be a good option for home renovation.
A personal loan is a rational option in case of credit card loan or loan transfer on a credit card. For the simple reason that though credit cards offer a lower rate of interest initially which is also called the promotional offer the rate of interest is much higher once the promotional offer is over.
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