We have all grown up listening to advice like don’t borrow money and learn to save. While the learning is good, it’s not that bad a thing to borrow money when it can help overcome certain situations. Borrowing money in the form of a personal loan can help one build a credit, clear outstanding debts, buy things they need and even improve the lifestyle. However, knowing how to effectivity use the loan makes a lot of difference.
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Here’s a brief look at when taking a personal loan makes sense and when it doesn’t.
When to Opt for a Personal Loan?
Using a loan to invest in education and a career that will boost the income down the road qualifies as a ‘good investment’. Whether one is planning to get a degree from a foreign university or apply for an executive program while continuing with the job, a personal loan will help ease the education expenses.
Purchasing or Renovating A Home
Another great occasion to opt for a personal loan is when either buying or renovating a home. Let’s be honest, buying and renovation are expensive affairs and sacrificing all the savings on them is a bad idea. A personal loan can easily help with the down payment or purchase of expensive materials that are required during a renovation. Also, taking a loan for an asset that will appreciate with time is one of the best uses of the loan.
When Not to Opt for a Personal Loan?
The dream of going on a once-in-a-lifetime trip is surely enticing but thinking of fulfilling it with a personal loan is a surefire way to burden oneself with a debt. Pumping the brakes on those dreams and saving through income to visit the Eiffel Tower in Paris or the beaches in Hawaii is a wise decision. So, one needs to think twice before taking a personal loan to fund a vacation.
Embarking on a vacation when there is extra cash in hand is when one really earns it and enjoys to the fullest as a two-week vacation is surely not worth years of debt.
When planning a revamp of all things one owns, taking the personal loan route should not be considered. Instead, taking it slowly and buying one item every month will keep the budget from shattering and the pressure of taking a loan. For example, if one needs to buy a new fridge, air-conditioner and recliner, month-wise allocation will help big time. Budgeting is the best way to avoid debt while bringing home things one desires.
Another pitfall to avoid is taking a personal loan for hosting a grand wedding. According to a study, one-third of couples take a loan and go into debt to fulfil their dream of a lavish wedding. Keeping the wedding budget in control and handling the societal pressure well should be the deal. It’s not the guests who’ll help in repaying the loan, the couple and their families will be paying it off.
Saving up for the dream wedding and compromising on small things is the key to keep away from long repayments and high-interest rates.
While looking out for personal loans, comparing the lenders should be the first step. Settling for the first option that pops up might backfire and even close the door of a better deal. Many financial institutions offer quick disbursals, online approval within 30 minutes and a flexible tenure with an aim to make the process as hassle-free as possible. Trusted financial institutions like ABFL Direct ensures hassle-free application process, zero documentation and no collateral.