When you are going through a cash crunch, then a short-term personal loan can often be a life-saver. In fact, people take loans for all kinds of purposes- international trips, purchase of two-wheelers, and even marriages. However, are there some situations in which you should steer clear of getting a loan? The answer is “yes”.

Understanding the meaning of a personal loan

Although personal loans are meant to help the individuals who don’t have any other option for meeting their urgent financial requirements, they aren’t the only one to benefit from them. The lenders also earn a sizeable income from the interest collected on these loans. This is the reason why they often launch promotional campaigns to attract potential borrowers through lower interest rates and perks, etc. Many even offer “pre-approved” loans to their customers as per which they qualify for instant loans with minimal paperwork and no CIBIL score check. However, this doesn’t mean that you should take a personal loan even when you don’t really need it or if you can avoid it.

Need Vs Eligibility

Fulfillment of loan eligibility criteria shouldn’t always convert to borrowing. This is because in the end, it’ debt on your shoulders which you have to repay by any means. So, you should always evaluate your needs first before you sign on the dotted line.

For instance, the following are some of the good examples where obtaining an SBI personal loan, PNB personal loan, etc. is a good idea:

1. Education

It’s not easy to secure a seat in the top MBA or engineering colleges in India, let alone abroad. However, if you do manage to get one, you may come face to face with another problem- financing. Good education doesn’t come cheap, after all.  So, if you qualify for a personal loan, then there is no harm in borrowing it to finance the tuition fee. However, you may still look into standard education loans which often come at low interest rates and offer perks like moratorium period and lenient repayment structure. These can be better than a personal loan.

2. Medical Emergencies

You can’t put a price on health and wellness. Thus, if you need money for medical expenses, then a loan is totally justified. However, before you apply, do enquire about the time it would take for the funds to be deposited in your bank account. This is especially important if there is a medical emergency and you need the money on an urgent basis.

3. Debt Consolidation

If you have more than a few credit cards which have collected a lot of debt, then it can harm you in two ways- by damaging your CIBIL score, and by further increasing the debt (as the debt continues to accumulate interest). However, an appropriate loan can solve this problem easily.

Here is how it works- you can take a single big loan to clear the debt on all the cards. So, you are left with just one loan to deal with which not only saves money but also makes repayment easier.

Bad reasons for personal loans

There are many situations in which it’s advised to avoid any kind of loan. For instance, if you want to start a new business, then it’s best to money from friends or family rather than an SBI personal loan or some other loan. You can also try to raise the funds through venture capitalists if your business plan is big and attractive to investors.

You should never take a loan on behalf of someone else, and neither should you become a loan guarantor for someone you don’t trust a 100%. Loans for investment in stock markets are also never recommended. These situations involve a high level of risk which can lead to big problems later on.


As mentioned earlier, when it comes to personal loans, you should always focus on need rather than eligibility. Even if your bank is offering a loan at a low interest rate, you must not give in to the temptation and use your discretion to decide whether you really need a loan or not. In most cases, you won’t need one. So, stay careful, and choose wisely.

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One Comment

  1. raj says:

    interest and penal charges on all types of loan and credit cards including the personals be allowed as deduction under income tax u/s 80. this will be a real economy booster to raise demand.

    credit card is equally tempting to spend more than required and avoidable expenses. you also publish articles on how to spend on need basis -prudence, particularly from older generation as due to increased speed and pace of activities around us, the expenses and compulsive, comfort, leisure and pleasure seeking spending habits changed for worst both in men and women. increase scope of your articles to cover even sociologists, leisure,life style,data analytics,psychologist, fashion,trends etc,.

    we wish your portal to cover national /international reach.

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June 2021