Why is a personal loan so much in demand despite being expensive?

Personal loan is easily available, but in return borrowers have to pay a lot of interest. However, despite being expensive, there is no lack in the demand for personal loan. Let us know the reason for this, and also understand why personal loan is so expensive.

There is no dearth of options in terms of loan these days. People often carry a mobile short term loan in their pocket in the form of credit card. But despite all the options available, the demand for personal loan does not decrease. Whereas, if seen, this loan is expensive compared to other loans. Its interest rates are quite high. After all, what are those features that make it popular? Know about this here, and also know why personal loan is expensive compared to other loans.

Personal loans is expensive due to these reasons

Personal loan is a collateral free loan, that is, you do not have to mortgage anything to get this loan. If you fulfill the eligibility criteria, then you can easily get a personal loan. Therefore, it is kept in the category of unsecured loan. In such a situation, the bank does not have any such thing of the borrower, from which the bank can compensate in case of loan default.

In such a situation, the bank has to take a lot of risk while giving a loan. For this reason, banks keep the rates of personal loan high, so that if due to any reason a default condition arises, the bank does not suffer much loss. Apart from this, the interest of personal loan is also decided on the basis of its demand and supply. At the same time, inflation and government monetary policy also affect its interest rates.

Its demand does not decrease due to these features

You can apply for personal loan anytime and from anywhere. This is a collateral free loan. You do not need to mortgage any property etc. in exchange for this. It is a preferred option because it comes with easy terms.

Most loans like home loan, car loan, two-wheeler loan etc. have restrictions on the use of the loan, but there are no such restrictions with personal loans. You can use it anywhere according to your wish and need.

You are given a good amount of time to repay the personal loan. There is a flexible repayment period attached to it which usually ranges between 12 months to 60 months. In such a situation, you can choose it according to your convenience.

Personal loan is approved very quickly. If your credit score and documents are correct, then the loan can come to your account within 24 to 48 hours. Many times banks also offer pre-approved loans to their existing customers, in which the loan is available almost immediately. This proves to be a much better option in case of sudden problems like medical emergency or any immediate expense.

Compared to secured loans, there is very little paperwork involved in this. Usually, only identity proof (PAN, Aadhaar), proof of address and proof of income (salary slip, bank statement) etc. are required for this.

What is the eligibility for personal loan?

If you are employed and your age is 18-60 years, then you can apply for a personal loan. On the other hand, the age of non-employed people should be between 21-65 years. However, the age criteria may be different in various banks.

The minimum income for personal loan may vary in every bank / NBFC. In most banks, the salary of employed people should be at least 15000 per month to apply for personal loan.
Your credit score should be 750 or more. If it is less than this, you may face difficulty in getting a loan or the interest rate may be higher.
If you have been working in an institution for at least one year, then you can be eligible for a personal loan. At the same time, after working in business for two consecutive years, you can become eligible for a personal loan.