Why Or Why Not You Take A Personal Loan?

More and more Indians are getting comfortable with the idea of lending money from banks today. They act like a financial support pillar in middle-class family, allowing them to fulfill their dreams without destabilizing their savings.

What is Personal Loan?

Personal loans are short term unsecured loans, which can be used for any purpose by the applicants. As the name suggests most applicants use this to fulfill their personal needs, like medical necessities and educations etc. Being an unsecured loan, they tend to have a higher interest rate compared to other forms of loan, where the applicant is allowed to put a collateral against the loan as a security.

Personal Loan is used for:

A personal loan can be used to fulfill any financial need, depending on applicant’s desire. Banks are not allowed to monitor the use of this loan. Several people avail personal loan for financing weddings, renovating a home, planning vacations, financing education as well as for purchasing any expensive clothing, jewelry or gadget. It can also be used to meet any emergency medical expense or for any other miscellaneous reasons. It can also be used for making a small investment in a business, or for making a down payment for your house etc.

Personal Loan Eligibility Criteria

The eligibility Criteria for a personal loan can vary from one bank to other, based on the region, rural or urban. However, the general criteria remain constant which include occupation, income, age, repayment capacity and the residence of the applicant.

In order to get a personal, the applicant needs to be in proper health, with a regular source of income, be it through his job or his business. The employment history and the credit score of the applicant also play a significant role in deciding the approval of the loan.

Maximum Loan Tenure of Personal Loan

Personal Loan tenures can range between 1 – 5 years to 12 – 60 months depending on the loan amount its EMI rate.

Why can Personal Loan be a Bad Idea?

Add-On Offers

Today bank executives are so subtle with their marketing strategies, that they are conning potential applicants into buying multiple policies with the loan, which fees is directly inserted in their monthly EMI. These sales people tend to sell you offers like insurance, claiming zero extra fees, but usually add this fee directly in the EMI, seeking additional fees from applicants.

Avoid getting tempted by these market strategies, as they are just a way of fooling customers, and making more money out of them.

Higher Interest Rate

A personal loan is infamous for being the most expensive debt, which has a really high-interest rate, which can really affect the financial condition of an individual. Most people apply for a small amount for short period as a personal loan, but end up paying more than 15% extra on the principal amount, including all the interest additional fees etc. So we suggest you take a loan from a family member instead of a bank if you need a small amount of money.

Origination Fee

Almost every bank in the country charges additional fees for the origination of the loan, which mandatory for the disbursement of the loan. Some banks charge higher origination fees compared to others. This is an additional burden on applicant’s shoulders if he/she is going through a rough financial condition.

Pre-Payment Penalties

This is amongst the most negative clause held by banks in loaning procedure. Banks are nothing financial institutes and aim to generate more money, by lending money through interest. So if you take away this opportunity from these banks, and prepay your loan before the tenure, they tend to charge an additional fee for the advance repayment of the full loan.


Personal Loans are great, but it has its own loophole and money making strategies, which make us, question the whole construct of the banking industry. Personal Loans are popular for their uncomplicated procedure that usually has a fixed payment, with a fixed interest rate, which needs to be made in a fixed amount of time. So if you borrow money for 30 months and repay it month after month in 30 months, then this is going to be the best financial alternative for you.




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