There are different reasons why a person applied for a personal loan. Usually, the personal loan is the first option you’ll consider in case you’re having an emergency and you don’t have money on hand. But do note that a personal loan comes with interest once you applied for it. Some borrowers are having a hard time paying it back due to some reason and you don’t want to be in that situation for sure. So if you’re planning to get a personal loan and you’re not sure if you can pay it back, you may consider knowing the reasons not to get a personal loan.
Here are Some Reasons Why You Shouldn’t Get a Personal Loan
Using it for basic needs
Your regular monthly income should cover your basic needs. A personal loan must not be used to pay for it. Remember that a personal loan comes with interest if you apply for it. Aside from that, you also need to pay the processing fee. So for example, if you loan an amount of Php 20,000, there will be an interest and processing fee. Let’s say that the interest will cost Php 2,000 and Php 500 processing fee which means that you need to pay Php 22,500 in total for the money that your borrow.
If your monthly income isn’t enough to finance your daily needs, you may consider doing a sideline. It will help you gain extra money, so you don’t need to borrow money from a personal loan.
READ: Side Hustle Ideas to Earn Extra Cash
Using it to buy your WANTS
It is important to prioritize your needs versus your wants. Prioritizing your wants might cause financial problems. There’s no wrong if you want to buy what you want, but you should consider your budget first. If you don’t have the money to buy it, then don’t. This is most common in Filipinos since we all want to have the latest in terms of personal things and gadgets, but actually, that is not good especially if you don’t have money. Know that living within your means is important. Save money if you want to buy something, so you don’t need to apply for a personal loan to buy it.
Getting loan with no backup repayment plan
Having no repayment backup plan isn’t good. It might destroy your financial health. In addition, it will cause you a lot of stress. Do note that the longer you take time to repay, the higher the interest it will cost you. So it is very important to have a repayment plan and besides, it is your responsibility to pay what you owe.
Using it for investment
Investing isn’t bad. However, it is very risky especially if you don’t know that much about it. Investing is a great way to earn money, but it may also cost your money to vanish if you don’t manage it well. If you want to enter the world of investment, you should have your own money and not from a lender. Ask yourself, what will you do if you lose the money you owe from someone. If you don’t have an answer to it, better not apply for a personal loan.
Here are some acceptable reasons why you should get a personal loan:
- If you need money for medical emergencies
- For educational purposes
- If you have a repayment backup plan
- You’re committed to pay on time
As a final point, a personal loan isn’t bad. Actually, it is a good thing to know that you have an option in case you needed money for an emergency. What is not good is when you use it for worthless purposes. Be wise and responsible enough to know if you really need a personal loan. If in case, you really need to apply for it, be responsible enough to pay it on time.
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