Today, many people are availing personal loans irrespective of the need. Though personal loans are given purely on the basis of income flow, they have their relevance. You need to use them with care. Unlike home loans, these loans are given for a short period of time and without a security, hence they are very expensive.

1. Why Consider Personal Loan As a Last Option?
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2. Today, many people are availing personal loans
irrespective of the need. Though personal loans are
given purely on the basis of income flow, they have
their relevance. You need to use them with care.
Unlike home loans, these loans are given for a short
period of time and without a security, hence they
are very expensive.
Banks don't ask the purpose of taking personal
loan. They are all-purpose loans. But, over a period
of time, people are availing personal loans for
improving their standards of living rather than using
them to meet their unexpected emergencies.

3. While it is not a bad idea to take personal loans, wrong usage
of it (for wrong purposes or at unnecessary times) can get you
into trouble. If you take personal loan, you may have following
difficulties.
• You will pay high interest amount as there is no security or
collateral required.
• You need to understand that majority of your income goes
towards the repayment of the high cost loan, leaving you with
no surplus in your hand.
• As these loans are given for shorter tenure, there will be
more strain on your monthly budget in that period of time.

4. • Also, these loans attract penalties for late
payments. You should pay your EMI within the
stipulated time in every month.
• In case if you pay your EMI through cheques
and if you don't have required money in your
account, you many have huge cheque bounce
charges.
• As you need to repay your loan, you cannot
save for future needs. Affects your savings
plan over a period of time.

5. Use it as a last option
Taking personal loans is not entirely a bad decision. There
are some situations that justify taking a personal loan,
provided there are no other options (like borrowing from
friends, relatives, etc.,) available to you. It is the only
easily available loan which is very useful in times of need.
It helps a lot in case of sudden unexpected emergencies
like medical bills, hospitalization expenses, child's
education fee for professional course.
Banks provide personal loans by evaluating your current
financial status and your cash flow by considering your
salary, rental income, and see if you have any other loans.

6. This product has its own set of pros and cons, much
of it depends on its final use. So, depending on the
circumstances, you need to consider taking it.
Before you go for a personal loan, you need to keep
in mind, factors like
• Choose your lender carefully - look for the one
(bank) who offers lower interest rate.
• Take for a short term - even if your bank is willing
to give for 5 years, you should consider repaying
it within 2-3 years.
• Avoid many loans - if you take more unsecured
loans, you will have bad credit score. Also, more
loans lead to more strain on your monthly
budget.

7. Thus, personal loans that are long-term with high-
interest rates will affect your savings or investments
plans over a period of time. Consider taking them
to meet unexpected emergencies only.
Money Chutney provides insightful articles on
saving, investing, budgeting and financial planning.
These articles are intended to provide knowledge
and make people aware of methods and techniques
on personal finance India, so they can use it to
better their financial situation. These personal
finance strategies are targeted towards educated
middle class people in India, who typically look for
information on money saving tips.

8. For more information on personal finance,
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