Money plays a huge role in shaping our lives, having the ability to dictate how things turn out for us in this lifetime. While it does have the potential to turn our dreams into reality, there is a slight problem which most of us face – The lack of finances to truly do the things we wish to do. Now, while the lack of money can be detrimental on certain occasions, one should remember that there are multiple avenues through which we can bridge the gap between what we have and what we want. One such quick solution pertains to taking a loan, though not everyone might be in a position to avail it. Individuals who are eligible to avail a loan typically do so, with a major portion of our population indebted in one form or the other.
Personal loans account for a major portion of all loans taken, primarily on account of the ease of availability and flexible options provided. While they offer immediate financial relief, there are certain instances during which a personal loan becomes impractical, which is why it is imperative that one knows the reasons for which this loan can be taken.
Take a Personal Loan if:
You want to take a vacation – Our hectic lifestyle can be considered as the biggest reason behind the health problems we face. Long working hours, stressful work environments, unhealthy eating habits, they can all have an adverse effect on our life. A vacation is perhaps the best solution to counterbalance all this, but a vacation isn’t cheap. Individuals who cannot afford to pay for a vacation through their regular income can take a personal loan to travel and explore new possibilities. Lenders are not averse to providing a loan for such reasons, provided you have relevant documents pertaining to the trip. One can avail loans as high as Rs. 20 lakh, ensuring that money doesn’t play spoilsport in discovering a new you. Given the fact that most banks do not offer an exclusive product to take vacations, a personal loan is perhaps the best bet for us.
You need to pay for a wedding - Weddings are expensive affairs, there are no two ways about it, with most of them costing a bomb. Given the fact that a wedding is a one-time event (for most people), we do not think twice about the cost involved in hosting one. Indians are known to spend big during weddings, and a majority of people avail a personal loan to finance all the expenses. A personal loan can offer a quick and simple solution to ensure that everything goes smoothly during a wedding, ensuring that the attention is solely focussed on the couple and not anything else. Banks are willing to provide personal loans depending on the income of a borrower, with it possible to avail loans up to Rs. 25 lakhs in certain cases.
You wish to clear existing debts – We live in times where almost everyone has taken a loan to meet some financial emergency or the other. A number of people have multiple loans on their names, be it a home loan, vehicle loan, education loan, etc. Given the number of such loans, it can be hard to repay them individually. A smart choice would be to take one personal loan and utilise that amount to clear all existing loans, thereby leaving just one financial liability. Not only does it reduce the burden of paying interest towards multiple loans, it also aids in bringing up the CIBIL score. Most banks do not refuse a personal loan which is intended to clear existing debt.
You encounter a medical emergency – Let’s face it, life never goes according to our plans. Medical emergencies are something we never wish to happen but inevitably cross our paths at some point of time or the other. Given the cost of healthcare, a number of us might not be able to financially deal with the issue, even after utilising all our savings. A health insurance could offset the blow to an extent, but it might not cover additional expenses. A personal loan often becomes the last resort in such cases, offering some amount of relief to everyone involved. One shouldn’t think twice to take a personal loan during medical emergencies, for waiting can have a disastrous impact on our life. Also, the fact that a personal loan is quick to avail makes it an extremely viable option during these hard times.
You wish to further educate yourself/a loved one – Investing in education is perhaps the best way to prepare one to face life. Now, educating oneself through courses is not cheap, with quality education coming at a premium rate, which is often beyond the reach of most people. While education loans can be used to offset the monetary requirement, individuals could also consider taking a personal loan, primarily because education loans have stricter eligibility criteria.
You want better amenities at home – Home is where the heart is, and our heart often wants the best amenities. If you are someone who feels that your home needs some minor changes or new equipment, but lack the finances to purchase them, a personal loan could be the best bet in such situations. Banks will offer personal loans which can be used to purchase a new TV, upgrade your furniture, get your house painted, or just to renovate the interiors to reflect your new taste in things.
- To cover relocation expenses – While moving to a new city is an exciting prospect, it is typically accompanied by a horde of expenses which are often unavoidable. You would have to spend on transporting your belongings from one city to the other, renting an accommodation, setting up the house with essentials like furnishings, appliances, etc. All of this costs money, and can definitely set you back by a more than just a couple of thousands. In such cases, taking a personal loan can be a good idea as it would help you not only cover these expenses, but also help you conserve your savings.
- To pay credit card debts – While a credit card is definitely a useful thing, credit card debt is most definitely not. Credit card interest rates are usually quite high and can quickly add up to a lot. If you have mounting credit card debts, it may be a good idea to take a personal loan to pay them off, as personal loan interest rates are often lower than the interest rates charged by banks on overdue credit card bills. Also, by doing this, you will be able to improve your credit score.
- To make the down payment for a house/flat – You are in the market to buy a house and find one that fits your needs. But, the builder/seller needs you to make a down payment within a short time to block it for you. In such cases, where time is of the essence, taking a personal loan might be your best bet at securing the property.
The main reason for this is that home loans are often taken for much larger amounts and the lender (bank or NBFC) will take time to assess the property and your paperwork before approving and disbursing the loan. This process usually takes up to 3 weeks. Without a deal in hand, the builder or seller may not be too willing to wait. In such cases, personal loans can be a great option as they are typically unsecured and offered for lower amounts.
- Finance a small business - Getting a business loan involves a lot of work - evaluation of the business model, its prospects and potential, not to mention tons of paperwork. There are various scenarios when taking a personal loan for a business-related venture can be a good idea.
If your business is still in the ideation stage and you are looking for funds, a business loan may be more difficult to come by, given the lack of any track record, but a personal loan may be easily obtained. For a business loan, you may have to provide some collateral, which is not always possible. In such cases too, a personal loan may be more viable.
Taking a personal loan for a business venture is also sensible, if the loan amount that you require is not too high. Reason being, getting a business loan requires a lot of work, and only makes sense if it’s taken for a larger sum. Lastly, unlike personal loans which do not restrict the end use of funds, business loans will require you to submit a detailed business plan which must be approved by the bank before the loan is approved.
Regardless of the purpose behind a personal loan, one should realise that a loan is a huge commitment and should be treated with the respect it deserves.