- Taking a loan to boost your lifestyle with expensive gadgets, cars, traveling and eclectic goods have high chances of hurting your finances.
- The interest rate for these ranges between 10-24%, which is way higher than home loans, which attract interest rates of 7-8%.
- Here are a few interesting points on personal loans and why it is best to stay away from them.
It goes without saying that taking a loan to buy something, pay debts or expand business is a risk with someone else’s money. While borrowing is not a bad thing today, there are certain loans like personal loans that could hurt your finances.
Usually,
This is because personal loans do not require collateral, thereby making it riskier for the lenders, which is why interest rates are usually higher on personal loans.
With the growing fintech and investment sector, there are many ways to borrow money from a bank, an investor or a company.
Here’s why you should stay away from these personal loans
Money Insider takes a deep dive into the world-changing potential of financial awareness. It brings together the top young voices from the industry which is educating millions of millennials, Gen Z and more.
One such financial influencer is Raj Shamani, who is a digital content creator, entrepreneur, podcaster and investor. Founder of Shamani Industries,
Shamani is a very vocal personality on social media platforms expressing his views regarding the growing trends among millennials in terms of finances, relationship, human nature and so on.
Taking a loan to boost your lifestyle with expensive gadgets, cars, traveling and eclectic goods have high chances of hurting your finances. Meanwhile, borrowing money for your business or emergency needs will help you make more money and get you out of a bad situation.
Shamani has shared a few interesting points on personal loans and why it is best to stay away from them.
He believes that what you should take a loan for is more important than when you should take a loan.
He splits loans among two types:
- Loan for asset development.
- Loan for liability development.
However, if a loan is to maintain an expensive lifestyle – like buying a new gadget or a car, then it is a loan for liability and these are the kind of loans you should stay away from.
This is because there are several risks in taking a
- Not being able to make repayments on time.
- If you skip a payment, your credit score will be impacted.
- With a low credit score, no bank or financial institution will lend you money easily in the future even in emergency situations.
- High loan amount can eat up your monthly income.