We can automatically use personal loan to pay up for almost anything, however, many people take this literally and use this to their own advantage.
According to one news, some loan applicants have come up and cited a few, peculiar reasons for applying. Certain reasons such as buying an airplane were one of the reasons and another one was ” I want to buy a school and fire my teachers”. Yes guys, these were legit requests from applicants themselves.
Put those hilarious reasons aside, there are certain things that you should be wary when taking out personal loan and it is not meant to be taken as a solution to solve all your financial problems.
1. Downpayment for your house.
The downpayment is the one standing in the way of an individual trying to own a home and that most people can’t even afford to have a hefty sum to put down even for basic home.
One should really think twice before applying for personal loan to purchase a new home via downpayments. You are taking a very high risk in taking out two loans to purchase a new home.
Instead of having a personal loans, look for those with zero down payment home loans, affordable housing schemes or consider withdrawing from your EPF account to buy a new home.
2. Invest in stock market
The key thing here is: Do not risk money that you can’t afford to lose!
If you do not have sufficient cash-in – hand to start investing in a stock market, then maybe you shouldn’t . Seriously folks, it is a huge risk to take out money from personal loan to invest in stock market as they are very unpredictable in nature. Because of that, you’ll also be stuck with repaying all your loans from there. What you can do is opt for low – risk ways to grow your money.
You may consider having a fixed deposit account, which carries around virtually zero risk and slowly can cultivate interest earnings for you.
3. Don’t use it for unnecessary renovations
Are you willing to fork out money through personal loan to have a nice home? There is a difference between crucial maintenance and revamping your home with unaffordable lavishness. Seriously, its not worth to have a nice home and yet accumulate massive debts at the same time.
A personal loan might come in handy when you have a need to improve your home for safety purposes. Also, if you need to have your home refurbished before selling to increase your resale value, then it will also be smart to reconsider a personal loan.
You can make a profit if the resale value is above the interests and fees needed to pay for the loan.
There are many more circumstances in which you should not apply for personal loans in order for you to avoid accumulating unavoidable debts, but however do not let this stop you from applying for them should you ever need them for personal reasons such as investing in your education, career advancement or even having a small business. All these will lead you to only having ‘good debts’ instead of “bad debts”.
Its your decision!
Remember guys, it is your decision to get a loan as and when you need it, so long as you are able to repay the loan, that you should seek your financing to achieve your goals.