Personal loans are a lucrative option to avail funds in an emergency or meet a personal expenditure that you cannot fulfill due to financial constraints. The popularity of unsecured loans in general and personal loans, in particular, has prompted banks and NBFCs to design various personal loans that fit their customers’ varying needs.
The best thing about personal loans is that you are not bound to use them for a predefined purpose; you can use the funds as you please. However, understanding the different kinds of personal loans available in the market can help you choose wisely and find the best option for your financial needs.
Here’s a look at the different kinds of personal loans available –
- Flexi Loan–Flexible personal loans have a pre-approved cash limit that enables you to avail of immediate financial help for unexpected expenses. After availing flexi loan, it is up to you how you want to spend the loan amount and how much is out of the limit you wish to utilize.
- Debt Consolidation Loans – Debt consolidation loans offer you the opportunity to pay off all your existing debts by taking a personal loan that costs you lower interest. Even though personal loans charge a higher interest rate compared to secured loans, it is still less than the interest rate on credit card debt. It is helpful for those who have accumulated significant credit card debt due to unforeseen circumstances.
- Salary Overdraft – A salary overdraft facility works like a revolving credit on your salary account. If you avail of a salary overdraft, you may withdraw a predefined amount over and above the balance in your salary account whenever needed.
- Loans Against Fixed Deposits – Loans against fixed deposits are secured loans wherein the applicant must pledge their fixed deposit as security to get a loan in return. The loan amount available will depend on the fixed deposit amount. You may avail of up to 90-95% of the deposit amount.
- Pawn Loan – Those who can’t qualify for a conventional loan may opt for a pawn loan or a pawnshop loan. It is also known as a collateral loan. To avail of a pawnshop loan, you must provide collateral such as jewellery, possessions such as a TV, fridge, or musical instruments. If you don’t repay the loan as agreed, the pawnshop may keep your collateral or sell it to recover their losses.
- Payday Loan – A payday loan is a short-term borrowing wherein you can avail of a small loan at a high-interest rate. The loan amount is based on your income. The principal is usually a portion of your next pay cheque. Payday loans are not recommended if other sources of credit are available. It is because of their high-interest rates and the impact on income.
- Pension Loan – Small personal loans designed for pensioners are known as pension loans. This personal loan form is only available to those who fulfill the pension loan rules, including the pension loan age limit.
- Top-up Loan – A top-up loan is a unique facility that most banks offer their existing home loan customers. It is a loan that allows you to borrow a certain amount of money over and above your home loan.
Personal loans are versatile instruments of credit that are easy to avail and quickly granted to those eligible. Choose a personal loan type that is best for you based on your income, funding needs, and repayment capacity. To find the bank or financial institution that can offer you the best terms and interest rates on personal loans, visit KreditBee – India’s fastest personal loan platform today!