Personal loans are surely expensive, but they come in handy when you need a lot of money in a very short period. But there are times when people take a personal loan when they don’t really need it.
Now let’s see the 5 good and 5 bad reasons for taking a personal loan.
1) To pay off Debt
The best and wise way to use a personal loan is to pay off other loans that are piling up and becoming hard to manage. If you have a large outstanding amount from another loan, or a credit card then you can use a personal loan for clearing the debt and put it under one loan.
2) Medical Emergencies
Personal loans are the best when it comes to medical emergencies that at most times strike out as a surprise in the form of accidents and sudden illness. Personal loans can be taken easily through online means anytime from anywhere and you get the amount you need in a short period
3) Moving to a new place
Moving to a new place, especially in a new city can be quite an expensive affair. Even if you have sufficient credit left on your credit card, a personal loan could be a better option, for its interest rates are usually lower.
4) Car Repair Bills
Car repairs are always expensive be it a minor car paint job or a major component replacement. Though you can postpone or leave such repairs aside, if car is your only means of transport to work, then you are left with no other choice. You can take a personal loan in such situation if needed, to fix any major issue and not on aesthetic detailing work.
5) Home Renovation
Home renovation is another expensive affair. This need not be for making our homes look better but there are many other basic repairs that cant be avoided or postponed for a later time. In such cases personal loans come in handy.
1) Gambling or for other games
It is a very bad choice to take a personal loan to gamble or for playing any other games. These are just for your pleasure and are not necessities.
2) Investing in Stock Market
Investing in stock market is a good option when you do it with your surplus money/ savings. But borrowing money to invest in stocks is as good as borrowing money for gambling because it is very risky venture.
3) Investing in a New Business
Starting your own business is rather a good move. However, you should avoid taking a personal loan for the investment. This is because there are plenty of better options such as small business loans, roping in co-investors, or choosing asset-based loans and so on.
4) Illegal Activities
If you use a personal loan for illegal activities, then when your lender finds out, they can slap a heavy penalty, or even take a legal action against you. This is why your reasons for taking a personal loan should always be within the bounds of legality.
5) Giving a Loan to a Friend
People often take personal loans on behalf of their friends, when they claim they are not eligible themselves. However, in no circumstances is this a good idea. A loan comes with a big responsibility, and if you default, or miss payments, it can have repercussions on your credit score. There is no reason to take such a big risk for someone else.