If you urgently need money and borrowing from friends and family is not an option for you, then another feasible option is to take out a personal loan.
Being an unsecured form of borrowing, a personal loan typically charges a higher rate of interest. However, there is no harm in taking out a personal loan if the push comes to shove, so long as you borrow within a comfortable limit. The rule of thumb is that your monthly EMI (of the loan) should not be more than half of your monthly take-home salary.
For instance, if your monthly salary is ₹50,000, then the EMI of your loan should be lower than ₹25,000.
There could be several pressing reasons for taking out a personal loan. For instance, you could have a wedding (or some other function) at home, or a personal emergency, or else — you are supposed to pay tuition for your child, or something else. Here, we list out the five key reasons for which people tend to take out a personal loan.
5 key reasons to take out a personal loan
I. Wedding: One of the most common reasons for taking a personal loan is to pay for a sudden large expense, such as a wedding or a big party, which is unavoidable and holds special significance in anyone’s life.
II. Personal emergency: A personal emergency could be anything — ranging from house renovation to meeting day-to-day expenses during a financial crisis.
III. Urgent trips: Although it is not recommended to take out a personal loan for vacation, there could be some urgent trips that you need to undertake – locally or abroad for which you may be compelled to take loan.
IV. Expensive item: Another reason could be to buy an expensive gift or jewellery for your spouse. You may want to do this on a special occasion while being fully aware that you can easily repay the loan in equated monthly instalments over the next six months or so. However, using a credit card in this situation could be a better proposition.
V. Education fee: Finally, another reason for which one could take out a personal loan is to meet the expenses of your child’s education. Although one could take an education loan to meet these expenses, but some people take a personal loan to meet the deficit.
For all personal finance updates, visit here
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
