When Not to Get a Personal Loan?
A personal loan is an unsecured loan that we get to meet our personal needs. The personal need can be anything; there are no restrictions on the use of a personal loan. No collateral is required in the loan. Bank checks your income and credit history and if you are eligible to return the loan bank will provide you a loan.
Besides banks, non-banking financial organizations are also there to provide you a personal loan. You just have to return the principal amount with the decided rate of interest within a given tenure.
There are some reasons for which you are advised not to get it:
To Buy a Car: /Bank doesn’t put any restriction on the use of the personal loan but still, you are advised to not get a loan to buy a car. If you get a personal loan to buy a car, first of all, you will not get a satisfying amount.
The interest rates for a personal loan are quite high as compare to the car loan. In this case, you are advised to get a car loan. Because in-car loan you will get the ex-showroom value of the car, and besides that, the interest rates are also low in case of car loan as compared to the personal loan.
For Educational Purpose: You can also think to use a loan for educational purposes, but this is not a good idea. Because there is a type of loan that specifically provides a loan for educational purposes. This is known as an education loan. The rates of interest in the case of the education loan are low as compare to the loan.
For Vacations: Some people get a loan for going on the vacations. Vacations are always considered as a non-necessary expense, so you should not put yourself in debt just for enjoyment. If you want to go on vacations you are advised to save the money or to use your saved money.
Paying Small Debts: A loan can also be used to pay small debts, but it is not worth to hassle to pay very small debts. You can pay these in other ways too. On the other hand, if these debts are on the small rate of interest and you are using a personal loan to pay these debts then you will be in loss because the personal loan is available at higher rates of interest.
You are always advised to think twice before getting a loan and shall know when not to get a loan because in case you fail to return this, it will affect your credit score badly.
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