Personal loans can act as a lifeboat when huge unplanned expenses strike your financial cruise (aka your bank account). A flexi personal loan comes with advantages over other forms of loans. For instance, you are not required to justify a purpose for the loan amount you’re borrowing, and collateral is not required for personal loans.
Even though the bank doesn’t ask you about the purpose of the loan, it is an important question that you shouldn’t avoid asking yourself. Why? That’s because an instant personal loan is not always the right option if your purpose is inept. Below are a few examples that outline when you should or should not apply for personal loan:
When will you get a personal loan Online?
- If you have a high credit score:
A high credit score will always have your back during emergencies as it lets you avail of financial assistance more quickly and at a much lower interest rate. If you have up to par credit score, you must take advantage of it and get the best personal loan.
- When you’re sure you’ll be able to make the repayment successfully:
Like any loan, repayment is an essential factor you must consider. Suppose you have a stable income with no debt. In that case, personal loans can be a great option to fund necessary expenses that your savings can’t cover, such as new furniture, renovation, or some other miscellaneous expenditure.
- You want to pay off debt on your credit card:
Debt is always an additional stressor that looms over your head. When your credit card debt has mounted, it can be an excellent option to get a personal loan. However, you must consider your credit score and ability to repay before going forward on this route. A strong credit/cibil score and a stable monthly income would suffice for such situations.
Times when you should not get a personal loan:
- When your credit score has taken a hit:
If your credit score is low, it may be due to your inability to pay back the debt on time. In other words, your reputation in front of lenders is dicey. It doesn’t mean that you won’t qualify for a personal loan (unless your credit score is dangerously low), but your loan can come with high-interest rates that may be difficult for you to cover. An online loan may not be an option if you have an unstable income.
- You want to invest in stocks or other investment schemes:
Personal loans are never the choice you should go forward with if your purpose is to generate returns on investment. If you’re getting a personal loan with the mindset that you’d be able to repay the amount comfortably with the gains you get on your investment, you likely need to pay more attention to the volatility of the investment schemes. No matter how low the risk may be, a risk is a risk, and you should never use a personal loan to put money into stocks or any other short-term investment plan. You never know when the situation may get against you.
- You want to buy a new house or pay for your education:
Home loans and education loans exist for a reason. A personal loan is unlikely the best option if you want to pay for a considerable expense or a medical emergency. A home loan or education loan will make you more comfortable with lower interest rates than personal loans.
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