4 Occasions When Not To Take A Personal Loan

  Author: Naveen Kumar

Personal loans are easily accessible and they are marketed aggressively since they are so lucrative for lending institutions. But as many of us are aware, they are one of the most expensive loans around. If a person takes a personal loan without due to consideration to factors such as repayment capacity, it could cause irreparable damage to family finances.

There are four occasions when people typically take personal loans. But they shouldn’t. Take a look at what these situations are.

A celebration Many times social pressures and our misplaced sense of priorities can cause long term financial damage. Celebrations and functions such as marriage and birthday parties are often occasions when people take personal loans to bridge any cash shortfall. Avoid such a mistake at any cost. What you spend in those few hours typically sets your family back financially, by years.

Buying expensive gadgets One way of never living beyond your means and having to rely on expensive loans like personal loans, is to ask yourself what you want and what you need. This is important in case of expensive gadgets that we all long for. If it is beyond your means i.e. within our savings and income, there is little logic in taking a personal loan to finance the purchase of the gadget. Remember, there is life after buying the gadget where money is required to meet important family requirements. The same is true for your family’s major needs like child’s higher education and your retirement.

Spending on expensive hobbies There are many hobbies like some adventure sports that can be expensive and can stretch anybody’s budget. As with gadgets, you should avoid taking a personal loan to finance them.

Speculative purposes There are investors who regularly get lured to invest and multiply their money in “flavour of the season” investments. If that is not bad enough, since most of them lose their hard earned money, many of them take personal loans to fund these investments. This makes the recovery from any financial disaster even longer. So, never ever take a personal loan for speculative investments. Remember, paying a high interest rate of a personal loan is a reality while getting the high promised return isn’t. Stay away from this recipe of disaster and keep your family financially secure.   

Personal loans, being unsecured loans come with the highest rates of interests and impose a formidable financial burden.  Though it is easy to get a personal loan and the temptation to get one may be strong, in the situations mentioned above it is wise to stay away from a personal loan at all costs.