People, who are strapped for cash, often consider taking a personal loan as the best way to overcome their financial woes. Given that these loans come at relatively lower interest rates as compared to other borrowing options available in the market, their growing popularity is really not surprising. However, the ease of availing a personal loan from private institution has also led to its significant misuse. This misuse often leads the applicants to get trapped in the vicious circle of taking personal loans every time they are faced with shortage of money.
Hence, it is important for the loan applicants to be able to differentiate between the reasons that make taking a short term loans reasonable and others that simply are not good enough for such a financial decision.
5 Good Reasons:
1. Consolidate Multiple Loans – For people, who are burdened by multiple smaller loans, which are becoming hard to manage, applying for a personal loan might be a great choice. It will not only help them to pay back these small debts all at once, but to consolidate their loans at one place for better management and efficient repayment with a significantly lower interest rate.
2. To Cover Medical Emergencies – Medical emergencies come unannounced and applying for a personal loan to cover the related expenses makes good sense. These loans can prove extremely helpful in preventing the applicants from spending their entire savings or risk losing a loved one. Even in case of applicants having an insurance cover, the loan can help avoid the inconvenience of having to wait for the payment.
3. To Pursue Better Education & Career – Many times people are not able to pursue better career or education options due to lack of ample funds. This hurdle can be easily overcome by applying for a personal loan to get the requisite funds that can help boost their qualifications and their income. However, the personal loans can be used for paying the tuition fee of most universities and institutions.
4. For Home Improvement & Renovation – Personal loans can prove to be a great way to cover expenses for carrying out home renovation and improvement tasks. In fact, it is one of the best reasons to apply for personal loan from private finance institutions as it ensures the overall value enhancement of the home. These loans are also preferred as they come at a lower interest rate than regular home loans.
5. To Finance a Wedding – Weddings are amongst the most important events in an individual’s life and making it the most memorable one requires major financial investments. A personal loan can help cover some aspects of the event that do not fit in the estimated wedding budget but might seem necessary to make it a truly wonderful experience to last an entire lifetime for the applicants.
5 Unworthy Reasons:
1. To Finance a Cosmetic Procedure – Most cosmetic procedures are aimed at helping the patients retain a young and beautiful look. Sadly these procedures are quite expensive and it is not uncommon for people to take personal loans to cover the expenses for the same. However, this is surely an unworthy reason for the loan applicants to place themselves under debt and extra financial burden.
2. To Invest in Stock Market – The greed of getting high returns on their investments in the stock market often lead many people to seek personal loans for getting enough funds. However, given the high risk level and the fluctuating nature of these markets using the loan money to invest in stocks might not be such a great idea after all, even for expert investors.
3. For Financing a Fun Event – Taking a financial loan to organize a family get together, birthday party or any other fun event is not a financially intelligent decision. It will lead the applicants to bear the burden of using a considerable amount of their hard earned money to repay the loan money spent to ensure a few hours of fun and frolic enjoyed by multiple participants.
4. To Gamble – If there is a single unworthy reason above all to take personal loan than it is definitely this. Spending the loan amount in gambling simply on the hope of making great earning with just a bit of good luck is not a risk worth taking. Even for the most compulsive gamblers the idea should be repelling as it will not only encourage their habit but also increase their general financial distress.
5. To Bail Out a Friend – It is not uncommon for people to take a personal loan to provide financial assistance to their friends facing serious monetary problems. However, the thing for the applicants to consider is that why could the friend in question not apply for the loan on their own. Furthermore, the loan might resolve the problem of their friend but will land the applicants in a cycle of debt, especially if they are not too financially strong on their own in the first place.