We have all heard advice like don’t borrow money and learn to save. While the learning is good, it’s not that bad to journey when it can help overcome certain situations. Borrowing money in the form of a personal loan can help one build credit, clear outstanding debts, buy things they need, and even improve their lifestyle. However, knowing how to effectively 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?
Education Expenses
Using a loan to invest in education and a career that will boost 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 buying or renovating a home. Let’s be honest; buying and renovation are expensive, and sacrificing all the savings on them is a bad idea. A personal loan can easily help with the down payment or purchase of costly materials required during a renovation. Also, taking a loan for an asset that will appreciate time is one of the loan’s best uses.
When Not to Opt for a Personal Loan?
Vacations
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 vacation when there is extra cash in hand is when one really earns it and enjoys it to the fullest, as a two-week vacation is surely not worth years of debt.
Consumer Goods
Budgeting is the best way to avoid debt while bringing home things one desires. 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, the month-wise allocation will help big time.
Lavish Wedding
Another pitfall to avoid is taking a personal loan to host a grand wedding. According to a study, one-third of couples take a loan and go into debt to fulfill their dream of a lavish wedding. It’s not the guests who’ll help repay the loan; they and their families will be paying it off. Keeping the wedding budget in control and handling the societal pressure well should be the deal.
Saving up for the dream wedding and compromising on small things is the key to keeping away from long repayments and high-interest rates.
Final Words!
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 to a better deal. Many financial institutions offer quick disbursals, online approval within 30 minutes, and a flexible tenure to make the process as hassle-free as possible. Trusted financial institutions like ABFL Direct ensure a hassle-free application process, zero documentation, and no collateral.