When is it a good idea to take a personal loan?

3 MinsOct 07, 2020

Ideally one should avoid taking on additional debt when faced with tough times. However, there may be occasions when a personal loan can be useful. It depends on the end-use of funds. 

If the personal loan can help in improving your skills or in growing your income, you should opt for it. But remember, regular and timely repayment is key when it comes to borrowing. Here’s how personal loans can come to your rescue:

personal loan

Repay existing costly loans

You have run up a large outstanding on your credit card. To conserve cash you are paying the minimum amount and carrying forward the rest. But what you do not realize is that you are digging a financial hole for yourself. 

Credit card dues attract interest rates ranging from 30-40%. On the other hand, personal loans start at an interest rate of 12%. It, therefore, makes far more sense to take a personal loan and pay off all your credit card dues in one shot. You can save a lot on interest cost this way.

Upgrade your skills 

You want to do a short-term course which will help your career prospects. Given the rising instances of job cuts and layoffs, it never hurts to polish your skills. If you cannot afford to pay the course fees from your pocket, you could consider a personal loan. Debt taken for education is good debt that will pay off handsomely in the long run. 

Meet an urgent business need 

You own a small fleet of passenger cars that you operate as private taxis. With higher demand for private travel post the Coronavirus pandemic, a large corporation wants to hire some cars for their staff to travel safely. But your vehicles need urgent repairs before they can be pressed into service. Why not take a personal loan and make your vehicles ship-shape in no time?

[Also Read: How a Personal Loan can help in debt consolidation]

Why take a personal loan?

  • You can avail a personal loan quickly. There is no collateral to be valued and it is sanctioned basis your income statement and credit scores. 
  • You can apply online and get a loan sanctioned in a few minutes with minimum documentation. 
  • If you have a good track record, getting a personal loan at a competitive interest rate is not a problem at all. 
  • Taking a short-term personal loan and repaying it on time is also a good way to build your credit track record. This will come in handy when you need to take a bigger loan in future, say a home loan or an auto loan. 

What to watch out for?

  • Ensure that the EMIs of all your loans together do not exceed more than 40% of your take-home pay. 
  • Check out charges other than the personal loan interest rate, such as processing charge, pre-payment charge, etc
  • Check for flexible repayment schedules
  • Timely repayment is the key. Don’t delay or default on your EMIs 

Axis Bank offers Personal Loans ranging from a minimum of Rs. 50,000 to a maximum of Rs. 15,00,000. Axis Bank Personal Loans come with tenures ranging from 12-60 months. 24x7 Personal Loans by Axis Bank helps you get access to instant funds digitally and without any paperwork. Besides, if you are a pre-approved Axis Bank customer you can even enjoy instant disbursal.

To calculate the EMI on your Axis Bank Personal Loan use Axis Bank EMI Calculator online.

Disclaimer: The Source, a Mumbai-based content creation, and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.