Is getting a personal loan a good idea?
Any average middle-class person with a stable salaried job might have time to consider whether it is a good idea to get a personal loan, so why a personal loan is a good choice depends on whether they have a good credit score.
Why personal loan is a good choice?
So, to know if it is a good idea to get a personal loan, one needs to understand how a personal loan can serve them; someone could get a personal loan for several reasons, from funding their wedding to paying off already existing loans. In addition, a bank may majorly approve a personal loan based on your income and rarely on purpose. So, it’s difficult to conclude whether is a personal loan good or bad; however, here are some of the reasons why a personal loan is a good choice for a person:
Payoff existing debts
If a person has maxed out all their credit card limits or has loans they want to pay off, they can get a personal loan. Generally, one must do this only if their income has increased and their credit score has improved. Otherwise, it could be challenging to say if getting a personal loan is a good idea.
Refinancing education loan
A personal loan is not the best choice when it comes to education. Education loan has a much lower interest rate and various other benefits. One could get a personal loan to fund any expenses that could have occurred otherwise.
Renovating your house
One can get a personal loan for home improvement.
Pay for your wedding
Indian weddings are supposed to be an expensive affair. Therefore, one may think using credit cards for all purchases, but this is when getting a personal loan is a good idea.
Funding a big purchase
If a person does not have enough savings at the moment to fund big purchases like a solo trip, buying home appliances/furniture, etc., here’s when is a personal loan a good idea
Medical emergency
Suppose a person or their family members need to undergo surgery immediately or get diagnosed with any significant illness. In that case, they could utilise a personal loan to cover their expenses.
When is a personal loan a bad idea?
Personal loans are much easier to get. One can take a personal loan and get the amount credited to their account within a week. However, one should be sure that they need that loan when they apply for it and know when to take a personal loan, good or bad. We discussed when it could be a good idea, but when is a personal loan bad?
Here are a few reasons why a personal loan can be a bad idea for the borrower:
Impulsive expenses
If one has the option to save for any future expenditure they are planning, it is always a better idea to save up over some time and then make that purchase. So, for example, instead of taking a personal loan and then paying EMIs with interest, a sound person can save some amount every month and spend when, say, four or six months down the line.
Bad investments
If a person’s expenses do not result in fruitful results, it becomes a bad investment. When money is borrowed through a personal loan, it should add value to the costs being made; if not, then is a personal loan a good idea? No. These are the situations when one should stop and ask themselves, “Is a personal loan good or bad for me at this instance?” They should often avoid taking any loans when there’s a feeling it is not.
Low credit score
If one has a low credit score, it is best not to take a personal loan as they will be charged very high-interest rates. And, if the person cannot repay the loan, their credit score will go further down. So, is getting a personal loan a good idea in this case? Only when all the existing loans are repaid in full.
Unstable job
Again, a person must ask, “Is a personal loan good or bad for me in this case?”. And usually, the answer would be a resounding NO. Also, banks are most likely to charge a high-interest rate or even not withstand such applications in extreme cases. So, think wisely if, in such cases, is a personal loan a good idea?
Conclusion
Discipline is a rare quality, and even rarer is to stay disciplined. The problem, however, is not if a personal loan is good or bad. It is with people’s ability to stick to a process of repaying over a specific time. If there’s surety in the repayment, a personal loan is an excellent option as a source of funds. Although, remember, perceive it only as a last resort as not everyone is a personal loan a good idea. In general, if expenses are more than earnings, amounting to debt, what a person needs in such circumstances is better money management and not a friendly banking system giving away easy money at affordable rates.So, it is wise to carefully assess the ability to fulfil the terms and conditions of a personal loan and then opt for it. A personal loan can be availed instantly, even for a nominal amount like Rs. 75000. The loan can be applied for a sum as high as Rs. 35 lakhs at an impressive interest rate of 10.99%. Moreover, the tenure can be up to 6 years. Hence, it is better to understand the advantages and choose a plan that fits the best. Visit the page today to learn more!
20 June 2023
5 mins read
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