5 key reasons you may be compelled to take a personal loan

Have you ever found yourself in a situation where you needed additional funds in your account to cover an unexpected emergency, or found yourself short on cash? Should you answered YES to the questions above, you're not alone. We all have experienced moments when unexpected urgent bills drain our finances.

While it's usually good to use your money for investment, the reason individuals go with a personal loan from a bank or other lending authorities, is sometimes using your own funds (even though that's recommenced to achieve long-term financial goals) is just not enough.

In this article, we review the most common reasons for securing a personal loan, along with how it can offer you immediate funds when you need them the most.

Common reasons why you might need a personal loan

1. Renovation of home

When you have to renovate your home which you bought on home loan then the only option that you have to raise money is via personal loan. The amount can be small or big based on how much you want to spend. Let us suppose you took a home loan of ₹45 lakh to buy a house. 

The house is raw. So, you need money to get marble fitting on the floor, furnishing and fittings, and also to buy some new furniture. Overall, it will cost you another ₹5 lakh. Alternatively, if you start to save ₹5 lakh, it will take another 10 months. So, you may explore the idea of raising a personal loan which you will be able to repay in the next few months, or may be a year.

2. Wedding at home

There is a wedding at home and you are falling short of money by ₹4-5 lakh. Neither you can postpone the wedding, nor do you want to tell any of your friends about the shortfall. And then you realise that you have a pre—approved personal loan on your savings bank account. 

You decide to go for it and easily, you will be able to repay the loan in easy instalments for the next 12 months or so. Sounds easy! Isn’t it?

3. Buying a luxury item for your loved one

Suppose you want to give your partner an expensive watch that costs around ₹2.75 lakh. You do not have enough savings to support your decision and you can’t afford to postpone your decision to give this amazing gift to your partner. 

And this would prompt you to raise a personal loan. Although the rate of interest would be a little too high, as they say – everything is fair in love.

4. Vacation

Six months ago, your friends and you planned a vacation to Dubai that will cost ₹2 lakh per head. Although you have this money in your bank, you don’t want to run out of it instantly. Someone recommended you to borrow the money for vacation, so that you do not get completely broke right after a breather of good time.

5. An emergency expense

Regardless of how much you resist the idea of a personal emergency, it may come knocking at a time when you are totally unprepared. Suppose you feel acutely ill and the medical expenses have overshot your health insurance. What will you do in this scenario? Beg, borrow or steal? Well, there is no need to beg or steal at all when you can simply borrow from a bank.

In conclusion, a personal loan can be a reliable financial tool when used responsibly and for the right reasons. Make an assessment of your repayment capability, compare interest rates, and read the fine print closely before you apply for a personal loan.

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