Explore the diverse types and versatile uses of personal loans, from financing weddings and home renovations to dream holidays and debt consolidation. Discover how personal loans can be a flexible financial tool for various life events.

Personal loans are unsecured loans that are provided based on the behaviour with past credits. Your credit history, score, job, age and other factors come into the picture for your loan.

Personal loans, more than a financial tool, can bridge your aspirations and reality. Banks and financial institutions have created tailored loans for marriages, home renovation, business requirements, and more, providing a wide array of options for individuals to choose from based on their specific needs and financial goals. 

What are personal loans used for?

You should be asking what are personal loans NOT used for! They are incredibly versatile and can help in life events and sudden requirements. Popular uses are as follows:

Personal Loans for Wedding Expenses 

A wedding is a rare occasion in one’s life, and your reality should align with the expectations. Personal Loans can become the bridge between expectation and reality. 

Prominent bank HDFC provides wedding loans up to 40 Lakhs. The interest rate currently starts at 10.80%. 

Personal Loans for Home renovations 

You start by changing the kitchen slab as a renovation, and most of the time, you end up laying new tiles. You can use personal loans to manage the renovation worries. Depending on the lender, you can borrow up to 50 Lakhs for various steps of a polished home, such as licensing, material costs, equipment and tools costs, etc. 

You can also claim some tax benefits from using personal loans for home renovation. Using section 24B, you claim up to Rs.30,000 on the interest paid!

Personal Loans for Holidays 

Taking a break and utilising those vacation days can be easy with sufficient funds. Here is where you can ask for a hand in terms of a personal loan. Holiday loans are beneficial as they provide enough comfort when moving to a different place. This loan can cover your airfare, hotel, sightseeing, and shopping charges.

Personal Loans for Consolidation 

When you have multiple minor loans, managing a single loan is sometimes better than going through numerous monthly payments and statements. You can easily manage and monitor your debt by consolidating all your other loans into a single umbrella. A new personal loan will be taken to clear all the other debts, and you can also plan to pay less EMI over a more extended period to help loosen up the financial hardship. However, you must check other factors, such as the closure charges and the interest over time, etc., so that the new loan benefits you.

Learn more about consolidation and other methods of refinancing through CredyFi:

https://www.credyfi.com/blog/navigating-through-financial-waves-using-loan-refinancing

In addition, more attractive loans are available for various demographics to realise their dreams. 

There are endless use cases on how you can use your loan. There are cases when it is used for building your business, buying a new vehicle, for higher education and owning your own home (although dedicated home loans and education loans are preferred). 

So, if your current use case is not mentioned here, no need to worry.

What documents are needed for personal loans?

Each bank has different sets of documents required to process personal loans. Pre-approved loans have very negligible documentation required as the bank account will have the customer’s required details already. The transaction behaviour showcased in the account will be enough for them to see you as creditworthy. The usual documents required for the approvals are:

• Application Form for the loan, attached with photographs
• Valid identification proof such as Aadhar, PAN card, passport etc.
• KYC documents for address proof, signature proof
• Income proof such as salary slip, and Form 16
• Bank documents such as bank statements and business account statements, if required.

With updated online facilities, it becomes more accessible for the verification and the disbursement of funds. 

Personal loans usually have interest rates from 10% and are usually provided for a tenure of 7 years without any moratorium period. You must start paying from the next month the loan is taken.

Are there any tax benefits for personal loans?

There are no direct tax benefits, but if you use your loan for any of the following, you can claim a deduction.

• Home renovation
• Home acquisition/ construction
• Business requirements

Want to know how to save tax on personal loans? Read here: https://www.credyfi.com/blog/tax-benefits-of-personal-loans-3-ways-to-save-on-taxes

In short, personal loans offer a flexible and convenient way to finance various life events and needs. Whether planning a wedding, renovating your home, or consolidating debt, personal loans can be a reliable financial tool. Understanding the types and uses of personal loans can help you make informed decisions about managing your finances.

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