A personal loan is a type of loan that is issued by banks and financial institutions. It is the perfect solution when you are in need of extra funds to finance personal expenses like your home renovations, education costs, business, medical bills or anything else.
Personal loans give you the financial flexibility to use the funds at your convenience and needs. As its name suggests, a personal loan is a type of unsecured loan that helps to meet your current financial needs. You don't usually need to pledge any security or collateral to apply for a personal loan.
However, there are a number of situations where you should never opt for a personal loan, in order to maintain a healthy cash flow and financial stability. Scroll down to find out 4 situations you should never get a personal loan!
Using it for a non-essential want or expense.
The first rule of saving and budgeting is to differentiate between wants and needs. Hence why you should never, ever use personal loans to fund something that you DO NOT need.
For example, there are cases where one may use a personal loan to renovate their home to provide a better living condition. But you definitely don’t need to take a personal loan to refurbish your home with luxurious brand-new furniture.
After all, you don’t want to commit to monthly repayments for something that isn’t important to you. Think of what you can do with the money if you didn’t take up the loan!
Do not take loans to make investments.
There isn’t a guarantee that you will generate a substantial return on your investment. Even if so, the interest rate of your loan will cut into or negate your returns. Investing in the stock market is a gamble, and you might lose the money you invested - personal loans already put you into debt and you investing that amount can put you in further debt than you already are!
So make investment decisions only with cash in your savings.
Avoid taking loans on behalf of others.
This is a big no-no! Some people make the mistake of taking personal loans on behalf of their close friends and families, as they might not be eligible themselves. However, you should keep in mind that at the end of the day, you (the person taking out the loan on behalf of the person in need) will be the liable party - bearing all the risk. If they fail to repay the loan, you may be stuck with loan repayments that are even your own!
Taking a personal loan to fund your wedding.
Yes, you deserve to have THE best day ever on your big day! But, it wouldn’t mean much if it puts you in debt for at least a few years. Remember, taking a personal loan to fund your wedding only means another monthly commitment for you and your spouse, which could be a burden especially once the honeymoon period is over and you realise how long you’ll be paying for a ONE day celebration.
Have a wedding that suits your budget. After all, the day should just be about you and your partner starting a life together!
IN NEED OF A PERSONAL LOAN?
Now if you must take up a personal loan, it’s definitely important that you do some research before applying for one. CompareHero can help you with that! Try our comparison tool to get the best personal loan suited for you. Visit our website today at www.comparehero.my/personal-loan.