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Should You or Should You not Take a Personal Loan

There are times in life when you might need money for a sudden expense. The money in your savings account is not enough. How should you cover the entire expense in such a case? A personal loan could emerge as your financial saviour.

All banks and non-banking financial companies (NBFCs) offer personal loans. Usually, lenders offer you these loans without asking too many questions. As long as you use the money for legal purposes, the lenders do not interfere.

But there are good and bad reasons for taking personal loans. You should exercise caution here. Ensure that your reason for taking a personal loan is valid.

Three good reasons for taking a personal loan: 

1. Medical emergencies: Life is unpredictable. You might not always be equipped to tackle sudden medical emergencies. For example, your health insurance plan might not cover certain illnesses. The costs of treatment, tests and medicines can spiral out of control in no time. It may become difficult to meet the costs even after dredging up your savings. In such situations, a personal loan can be a good option. Online personal loans are easily available these days. So, getting money at your time of need is no longer an issue.

2. Wedding expenses: Indian weddings are lavish affairs. A dream wedding can cost you a bomb. What should you do if your savings are not enough? A personal loan could be the perfect solution. Apply for a personal loan online and get back to planning your wedding. The quick processing of these loans would allow you to focus on the wedding preparations.

3. To clear existing loans: This is one of the best ways to use a personal loan. Use a fresh personal loan to pay off credit cards or other outstanding debt. Yes, you have to pay interest on the new personal loan. But the rate might be lower than that of your credit cards and other debts combined. Having a number of pending bills and unpaid debts has a negative effect on your credit score. In turn, this can affect your future borrowing needs. Save yourself from all the trouble. Get a personal loan to clear off your other debt.

Three reasons for not taking a personal loan:

1. Speculative investment like gambling or stock market: Speculative investments could result in low or no returns. Taking a personal loan for such a gamble is a big NO! The borrowed money could go to waste. Plus, you will be tied to a loan that did not benefit you at all.

2. Taking a loan on behalf of a friend: Sometimes a close friend or relative may be in need of a loan. They may ask you to take one on their behalf. You might feel sorry for them. But taking a loan for them is a bad idea. Ask yourself this: If a bank is unwilling to give them the loan, should you take the risk yourself? Any loan is a big responsibility. Suppose your friend misses the payment date or does not pay. Then there will be repercussions on your credit score. Taking such a big risk for someone else is not a good idea.

3. To cover everyday expenses: Are you thinking about applying for a personal loan to cover everyday expenses? Then it is time to look at your budget. A personal loan in this situation will only add to your woes. There will be the monthly instalments to pay. Instead, overhaul your budget and cut out unnecessary costs. Take a personal loan only for unplanned or sudden expenses.

To sum up

Getting a personal loan in India has is quite easy nowadays. Lenders offer attractive interest rate on personal loans and flexible tenors. Use these offers to ease your financial burden. But remember to be cautious. Weigh your needs to ensure you are putting the loan to good use.

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