Take a Personal Loan and not a Personal Loan Debt

Take a Personal Loan and not a Personal Loan Debt

by Johnny S

Nita wants to renovate her kitchen, buy a few designer clothes for her cousin’s upcoming wedding, and also buy a two-wheeler that’ll help her reach office in quicker time. She doesn’t have enough cash in hand to do any of these so she decides to take a personal loan from Tata Capital.

Now, Nita is not the only one that has chosen Tata Capital to take a personal loan. There are many who use personal loans to help them during financial crunches and emergencies. This must have gotten you thinking if you can do the same to deal with an immediate cash crunch?

Of course, you can.

To get personal loans, you don’t even need to pledge any security or collateral. Besides, lenders like Tata Capital give you the flexibility to use the funds as per your need. There are several institutions that provide personal loans on easy terms. But when you opt for a loan, make sure you don’t fall into a debt trap. There are various ways you can avoid personal loan debt. Here are a few:

  1. Make EMI payments on time to avoid fines. Ensure that you have enough funds in your account at the time of the EMI payment date. This not only helps you avoid personal loan debt but also makes you a trusted customer in the eyes of the lender bank or financial institution such as Tata Capital.
  1. As the adage goes, don’t eat more than you can chew. The same applies to personal loans as well. You might have taken multiple personal loans from different institutions but the sum of all your EMIs should not be more than 50 per cent of your take-home salary.This way you will always have enough funds to run your regular expenses at the same time pay off your personal loan EMIs without falling into the personal loan debt trap. Before taking up a loan, check the personal loan EMI calculator, compare the amount with your monthly salary. Do the math, its easy peasy!
  1. The idea should be to repay your loan as soon as possible, and the best way to do that is by using any sudden unexpected cash flow to repay personal loans. It could be a Diwali bonus from your employer, or capital gains on a stock or a generous uncle leaving a share of property in your ancestral town. Don’t blow off such sudden cash flows over a luxurious vacation or for purchasing a mammoth LED TV or an expensive phone. Instead, repay your personal loan.
  1. If you already have a personal loan running, don’t pick up more loans just because the sales rep keeps calling you. More importantly, don’t pick up calls or take loans from untrusted institutions. Always take loans from reputed banks or trusted financial institutions such as Tata Capital. It’s best to not succumb to temptations and end up taking a new personal loan every year.

In this way, you will only be setting yourself up for a financial disaster because in some year there may come a time when you may not be able to service your bloated outstanding loan amount due to financial crunch. And then, no personal loan provider will give you more funds to repay the existing mountain of debt.

  1. To avoid personal loan debt, ensure that your loan doesn’t become a huge burden on you. To do so, keep your eyes and ears open on news from the RBI on interest rate cuts. Maybe there is an interest cut around the corner, you should take your loan then. In addition to this, look out for offers such as zero processing fee, no pre-closure fee to make the most of your deal. You can also negotiate with your lender to combine all your personal loans with different maturities into one. A great way to avoid personal loan debt and reduce loan burden is to consolidate all loans into a single loan with a little longer maturity. This way your immediate cash flows will be better handled.

A personal loan can be a boon when used in the right way. If you do need a personal loan understand how the loan will impact your money or you will surely end up in a personal loan debt!

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