Thinking About Personal Loan? Analyze Pros and Cons

Do you need funds to meet marriage expenses? Or, do you need funds for education? Even if you need funds to buy the latest gadget or a new motorbike, personal loan is the answer to all. There can be any number of reasons to avail a personal loan, and the best part about this loan is that there is no commitment for the end use of the borrowed funds. So, even if you change your mind about the usage of borrowed funds after the loan amount is disbursed, the lender will have no say in that.

Personal loans are unsecured loans in nature, which makes it fairly easy for many people to avail as many individuals do not have any real estate or other valuable for submitting as collateral. Some of the common uses of personal loans are; debt consolidation, a wedding expense, one-time big purchase like a car, bike or latest mobile, travel expenses, home renovation, buying the latest gadget, or a medical emergency.

How Does it Work?

About 10 years ago, when you wanted to apply for a personal loan, you would be required to visit the branch of the bank fill the form and submit the hard copy of required documents like income proof, address proof, identity proof, and credit report (for some banks).

While in today’s time, you can check your eligibility with personal loan eligibility calculator. You can also apply for personal loan within 10 minutes, along with required documents from any place in the world through the bank’s official website. The bank checks your credit score by itself and assesses your creditworthiness for the loan. The loan application processing time has also now reduced to 2-3 working days. 

With the emergence of the FinTech sector, the process of availing personal loan has become even faster and hassle-free. Now you can avail loan even for short tenures as well, like 15 days to 3 months within a few minutes in the form of an instant loan. 

Pros of Personal Loan

  1. Consolidate Multiple Payments into One: You can consolidate multiple credit card payments with a personal loan. This way, you would only be required to keep track of just one payment instead of many. It will be far easier to manage one payment option and reduce your debt with just one payment each month.
  2. No Collateral: As mentioned earlier, the personal loan is an unsecured loan. Thus, no collateral or guarantee is required to avail of the loan. This gives an edge to personal loan over other loan types which require some collateral or guarantee. You don’t have to fear to lose any asset in case you face a financial crisis.
  3. Quick and Easy Application: Personal loan is provided by almost all banks and financial institutions. You can apply for the loan online through their website, along with the required documents. The documents required are minimal, and the complete process from applying the loan to disbursal usually gets completed in maximum 7-8 days. That is why a personal loan is a favorable option when the requirement of funds is urgent.
  4. Any Purpose: To avail of personal loan, you are not required or obligated to disclose to the lender the purpose for which you need funds. As compared to the home loan, where the loan is specifically for the construction of house or purchase of residential property, personal loans can be availed for any purpose.
  5. Choice of Tenure: When you avail a personal loan, you are also given the option to choose the tenure for which you want to avail upto the maximum tenure of 5 years. When you choose shorter tenure, the rate of interest levied is lower as compared to longer tenure. However, shorter tenure also means higher monthly payments as compared to longer tenure. Thus, to make the best choice, you should have clarity with regard to how much amount you can afford to pay monthly as EMIs.

Cons of Personal Loan

High Rates: Since a personal loan is unsecured, the rate of interest on it is higher as compared to secured loans. Lenders are taking a higher risk when they give personal loan as they do not have any assets for security. The interest rate you will get will depend upon a few crucial factors, such as your credit score, income, loan amount, and the amount you can afford as EMIs. Besides, you are also required to pay processing fees while availing of the loan.

Although, you can also choose to make pre-payment, after which you can either choose to reduce your tenure or your EMIs.

Eligibility Criteria: Since a personal loan is unsecured, lenders follow strict guidelines and eligibility criteria while assessing a loan application. They check credit score, work experience, income available for EMIs, etc. are some important eligibility factors.

The problem of too Many: Since a personal loan is relatively easy to avail, if one has a good credit score, it is easier to get into a debt trap by availing too many or too much amount. When a large chunk of your monthly income goes into EMIs regularly, it possesses a difficult financial situation.


A personal loan is an ideal option if you need funds in short notice and have the capacity to repay it within a medium length tenure. Make sure to compare lenders before applying direct, especially if you have bad credit.

A personal loan is an ideal option if you need funds in short notice and have the capacity to repay it within a medium length tenure. Another plus point is that there is no collateral required. However, the fact that its rates are comparatively higher, you need to plan carefully about your finance before opting for it. If proper due diligence and assessment is done of the need and planning of repayment, then, the personal loan is a very useful tool.


Ajay Deep

Ajay Deep is a young enthusiast who Loves Chandigarh and is always eager to make this beautiful city even more beautiful. A Mechanical Engineer By Chance and Working in an IT MNC by Choice. A Writer, Photographer and a Budding Entrepreneur. A Designer, Developer and Digital Marketing Expert. In brief : A Jack of All Trades and Master of Few :) You may reach Ajay Deep at
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