Taking a personal loan is not necessarily a bad thing, but rather, it can be useful in some situations. You can arrange payments that you cannot afford and build your credit score. A personal loan is one of the most convenient ways to finance your monetary requirements. It is an unsecured loan and carries flexible tenure and EMI schemes. Usually banks and NBFCs do not restrict the end-purpose of the loan, thus you can fund any of your needs with the loan amount.
There are several uses of personal loans and before you take the decision of applying for the funds, weigh all your options carefully as to why you require the finance and the best way to put it for use.
With this in mind, let’s consider the best ways you can use a personal loan.
- Consolidate Debts
Debt consolidation is a way to pay off the old debts by transferring those into one new loan. By doing this, you reduce the amount of stress that you experience from handling multiple loan accounts. Using a personal loan for debt consolidation can give you a better control over your financial situation. It can make tracking repayments easier by managing just one EMI per month than multiple ones.
You could be carrying several loans such as credit card loans, car loans, etc that are more expensive than personal loan. If majority of pending debts are of higher interest rate than the personal loan you intend to take, then you should definitely consider debt consolidation.
- Important Purchases
Another good way to use a personal loan is to help with important purchases. Certain goods and items are needed to run a life and these things are the ones you cannot do without. Are you delaying purchase of a new laptop or refrigerator? Do you want to furnish your house? Well, then apply for a personal loan, and you can buy all the essential items with the funds. You can easily pay off the loan by paying a monthly EMI. Thus, you do not have to stress your pockets or be without the important gadgets or items you require.
- Help Start a Business
Launching your own business can be an expensive affair with the need to buy/rent an office space, arranging permits, inventory, equipment and a lot more. Banks and NBFCs hesitate in offering business loans to start-ups, thus, an alternative rescue is a personal loan. A business loan may also not be provided to establishments that operate in a risky industry (industries that have seasonal ups and downs or figure in maximum failure).
You can borrow as less as Rs. 1 lakh to Rs. 20 lakhs via a personal loan and use the fund for a new business purpose. Many budding entrepreneurs work on a tight budget, and personal loans can help fund their start-ups.
- Medical Expenses
Your health is of the utmost priority. It is important to invest in your health when needed. Even if you have a health insurance, it may not always cover the complete cost of a medical treatment. Sometimes, a health insurance may not pay for certain medical bills. In such cases you can use a personal loan to pay for healthcare bills, up front. At the same time, the funds can be taken to pay for medical expenses of your relatives and friends, if you wish to help them with financial support in times of medical emergencies.
- Fund a Wedding
Many people take a loan against property or loan against gold to fund their marriage. While secured loans carry a lower interest rate than a personal loan, it also means an asset is submitted as collateral to the bank. In case the borrower falters at paying the EMIs, the asset could be confiscated by the lending institution. For instance if you take a property loan and do not repay the loan on time, then the property will be sold off by the bank to recover the loan amount. It is nowhere wise to put important assets at risk, when you can easily get a personal loan for your marriage expenses.
- An Unavoidable Travel Trip
While it is not advisable to use a personal loan for vacation trip and luxury, certain travel plans are essential and cannot be avoided. Do you want to visit your family members living in another state or country but unable to do so because you lack funds? Do you want to explore a city personally in order to study the relevant market conditions related to your business?
There could be times when a travel trip is unavoidable but you cannot make it due to insufficient funds. There could be an unfortunate emergency such as passing away of a blood relative living far-off. You can simply choose a personal loan to sponsor your travel and stay for urgent travel trips.
- Acquire a New Skill
It is always great to enhance your knowledge or skill. If you want to enrol into classes such as dancing, music, or pursue graphic designing, photography, a particular sport etc, you can fund it with help of a personal loan. Small educational courses or vocational courses may not be eligible for a traditional education loan, thus personal loans are suitable in such incidences. You can use this loan to sign up for the relevant course and attain all the equipments and study materials needed.
If you see a personal loan as an investment, then the debt would not seem that bad, after all it is enabling you to improve and develop other skill sets, which can pitch you a better paying job or a more satisfying experience.
The above-mentioned needs are some, which prompts a person to use a personal loan if there is a lack of funds. If you want to put your personal loan to best use, then these could be some of the requirements you can utilize the funds for.