Personal loans are available for your lifestyle needs; but should you go for them? | Mint

When you are in need of money, what can you do? Borrow from someone or approach a bank or a financial institution. Among various types of loans, one can seek a personal loan from a bank or a financial institution. For the uninitiated, a personal loan is an unsecured loan that borrowers use to meet their personal financial needs.

These needs can be urgent as well as lifestyle. What if you want to go on a vacation next month with some friends, a plan that was made a few months ago? Or you have been saving for a long time to organise a big party for your partner but have now realised that you fall short of ₹2 lakh.

What would you do in such a scenario? You would be forced to cancel the plan. And if you don’t want to do it, what option do you have? Maybe raise a personal loan! These are some of the purposes for which you may want to consider taking a personal loan.

Key lifestyle reasons to raise a personal loan:

1. Organise a wedding: This is the most important large expense for which one may feel compelled to raise a personal loan. Imagine you wish to spend ₹20 lakh on a wedding, and you fall short of the money by, say, ₹5 lakh. There would be only a few options apart from raising a personal loan to meet the shortfall.

2. Buying a luxury item: You may want to buy an expensive item, for instance, a gold necklace or some pricey gadget. And say you are falling short of money by ₹3 lakh. What else would you do? A personal loan is a feasible and rational thing to opt for in such cases. This is based on the assumption that you have the means to repay it.

3. Travelling abroad: With the rise in Indians’ aspirations, a large number of people have started to travel overseas frequently. What was once seen as a luxury is now considered part of a lifestyle. So, if you are planning to raise a personal loan for the same, it is not an unusual thing to do.

4. Weekend getaway: If you are tired of your daily grind, you may have a plan to go on a weekend getaway to unwind. This is a plan to have some fun and get ready for the next week’s work. Well, if you are short of funds, taking a personal loan is not an irrational thing to do.

5. Club membership: If you have recently moved to a new township or city and want to get some networking with the locals, you may want to avail a club membership with the money borrowed from a bank as a personal loan. Although raising a personal loan is not quite advisable in this scenario, it can be done if you think the club membership is too important to ignore.

6. A terrace garden at your new apartment: You have a new apartment and are planning to get a new terrace garden. If you are short on funds, you can only raise a personal loan for it.

Meanwhile, it is important to understand that raising a personal loan is not advisable for all of these activities. These could be important for some, but certainly not for everyone.