Personal Loan: When there is a shortage of money, many times I feel like taking a loan. If the loan is taken for the right reason and the interest rate is also correct, then there is no harm in it. But if you want to take a loan just to holiday or buy an expensive thing, then this will not be the right decision.
Loans should be avoided for such expenses. Experts believe that it is not right to take a loan for those expenses that can be avoided for some time. He says that personal loan should be taken only when there is no other way. For example, if there is a gadget that you can save and buy in six months, then it is better to wait a little instead of taking a loan.
Why should one avoid taking personal loans unnecessarily?
- Interest burden: On taking a loan, you have to pay interest, which withdraws money directly from your pocket. This interest on personal loans usually occurs up to 12–15% annually.
- Habits can deteriorate: If you repeatedly start taking loans for such tasks, which are not necessary, then gradually it can become a habit and you can get caught in the debt trap.
- Dream delay: Taking a unnecessary loan reduces your savings and can be averted to buy big dreams like a house or take a car.
- Save the loan: There may be some situation in future when a loan is really needed. Large expenses like home repair or marriage. If you already spend borrowing capacity on unnecessary things, it can be difficult later.
- First save and invest: It is better to save money first than taking a loan for unnecessary expenses and then invested and gradually prepare funds for that thing.
When should a personal loan be taken and when not?
Personal loans should be taken when you need money immediately and you can also repay it. For example, if there is a medical emergency or to buy something important, then taking a loan can be right.
But if your income is not stable or it can be difficult to repay installments, avoid taking a loan, as interest is very high. This is the reason why experts recommend avoiding taking personal loans to buy travel or luxury items.
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