Personal loans have emerged as a popular financial product for individuals to fund many needs. Be it a medical emergency, paying off debt, home renovation, and more, a personal loan could be your saviour to help you out.
If you have a good credit score, a sound repayment history, a stable income and a consistent employment history, you can avail a personal loan of up to Rs.25 lakh from leading online lenders.
Although a personal loan helps you cover many urgent financial needs, many people avail it for bad reasons. Since personal loan interest rates are expensive and if you don’t handle it properly, you can land in a financial mess.
In the same context, let’s list out 3 good and bad reasons for availing personal loans online.
The good reasons first – 3 good reasons!
1.) Paying off existing debt
Many studies have revealed that around 47% of the personal loan applicants are those who avail it to settle their existing debts. Yes, a sensible usage of the personal loan funds is to pay off the existing credit to your name. Why? It’s always comfortable to pay one EMI than finding it hard to manage 3-5 EMIs and exhausting your monthly income. If you have a huge outstanding amount of another loan, use the personal loan as a cover.
2.) During medical emergencies
Unfortunately, quality health care is not inexpensive these days, and if something happens to your loved ones, you can use a personal loan to pay for medical bills. You can always apply for an online personal loan quickly and get instant approval and money in your bank in 24 hours.
3.) Home improvement
Sometimes, home renovation is also a good way to applypersonal loan online. People have analyzed that the cost of lighting and bathroom fixtures, quality paints and more could be higher. As a result, many avail a personal loan to complete home improvement.
Now the bad reasons – 3 bad reasons!
1.) For gambling
The base of gambling is greed, and while sometime you may win some amount, the chance of losing money is more. Some people apply for a personal loan to utilize the amount in gambling. They think that they will pay off once they make good money. However, it is not the reality always as you have a higher chance of losing your money while indulging in gambling.
2.) For investing in stock market
Although stocks can give you a higher return on investment, the chances of its ROI depends on the market performance. As a result, when you avail a personal loan for investing in the market, it may not give you the desired results. Hence, the chances of your paying off the loan and converting into bad debts are higher.
3.) For investing in a new business
Yes, some people also take a personal loan for starting a business which is not good. Why? There are better options such as getting some co-investors or you can opt for secured loans or small business loans as well as they have a lower rate of interest.
The Bottom Line
Avail an online personal loan only when you know that you have the financial ability to pay it off within the stipulated tenor, no matter what the reason.
If you think you are ready to apply for a personal loan, compare all offers on a third-party website and avail a deal that suits your needs. All the best!