When Should You Avoid Taking a Personal Loan

Be it the fat Indian wedding, expedition time, child education or any other purpose, the importance of personal loan is manifold to fulfil these purposes. It comes easily as you don't submit any collateral to procure the same. Unlike secured loans where one has to submit collaterals such as fixed deposits, mutual funds, stocks and alike to access the same. However, there are situations when you should avoid taking a personal loan for your overall financial well-being. Let's discuss this critical topic in greater detail.




Times When You Should Say NO to a Personal Loan


A personal after all is a debt that you need to repay over time. So, if you don't get the loan with the right terms and conditions, avoiding the same is advised, unless you face an emergency and your savings are not sufficient to meet the same. After all, there are some things you should never do with your money. Let's look at certain situations when you should say 'NO' to a personal loan.


When Personal Loans are Offered at Much Higher Interest Rates 


Personal loans come at interest rates ranging from 10-25% per annum, on average. Some lenders may charge you over 30% even. Needless to say, higher rates will make you pay more over the loan term. Broadly speaking, personal loan interest rates depend on your income, credit score, repayment capacity, existing debt obligations, etc. Credit score, which ranges from 300 to 900 in India, represents your creditworthiness. A score of over 750 is considered excellent. 


More income, a credit score of more than 750, enhanced repayment capacity, and no to less debt obligations will likely ensure you with lower interest rates. 


But if you are offered higher rates despite scoring big on these factors, say NO to the loan offer. You deserve better rates. Maybe compare more loan offers on different marketplaces and talk to more lenders. You will get the best personal loan interest rate. 


Don't Take it to Fulfil Your Expensive Desires 


As personal loans are available for almost every purpose, people go on to buy expensive smartphones using the same. While desires are fulfilled, financially, you don't get much out of it. The asset you purchase must carry some value. Fixed assets like iPhones keep depreciating over time. So, when you look to sell them years later, you may not get even half the sum you would have paid to buy the same. And don't forget the interest payable on a personal loan, making it a not-so-worthy option for you. Buying iPhones is advisable through your savings only. However, we leave it to you to decide whether you should buy iPhones, on which you might have pinned aspirations, via loan or savings.


When You Already Have Multiple Debt Obligations


So, you are servicing a home loan, have a credit card outstanding balance and want a personal loan. You are making fun of your financial life without being aware of the potential perils likely to bite you later. Too many debts leave you with too little for your needs. With existing debts, personal loan interest rates will only heighten, making your daily life a financially painful story.


Conclusion 


A personal loan must not hurt you financially. So, making a personal loan application after understanding your finances is pivotal to sound financial health. Tune in to zarooribaathai.in for many such financial insights. You can even gain information on beauty, health and sports. Visit the website to know more.

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