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LoansJagat Team

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4 Min

26 Jun 2025

When A Personal Loan Can Actually Be A Good Financial Decision?

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Rashi is a 34-year-old marketing professional. She has a total of three credit cards. Her total outstanding amount across three cards is ₹2.5 lakh. Each card charges an interest rate of 36%.

 

To handle this, Rashi opted for a personal loan of ₹2.5 lakh at an interest rate of 11.5% for a term of 5 years. This helped her in replacing her high-interest payments with a structured EMI of ₹5,500. Her monthly EMI burden was reduced.

 

Also, she is now repaying it in a disciplined manner and saving around ₹4,500 every month. If you are using a personal loan for the right reasons with proper planning, it can help you achieve financial goals without derailing future plans.

 

1. When Paying Off Multiple Debts

 

Do you also find it difficult to handle different debts with high interest rates? To resolve this, you can take a personal loan. It will help you bring all your debts under one manageable EMI. 

 

Let’s look at an example:

Credit Type

Amount (₹)

Interest Rate (p.a.)

Monthly EMI (Approx.)

Credit Card 1

₹75,000

36%

₹3,000

Credit Card 2

₹50,000

36%

₹2,000

Credit Card 3

₹1,25,000

36%

₹5,000

Total EMI

₹2,50,000

-

₹10,000

Personal Loan EMI

₹2,50,000

12% (5 years)

₹5,563

 

2. During Medical Emergencies

 

We all know that medical costs mostly arrive suddenly and cannot be avoided. Some of them are not even covered by insurance. If you find yourself in such a situation, a personal loan can be a suitable option for you.

 

3. For Career Advancement

 

We all need to keep ourselves updated for our jobs through skill-based courses or professional certifications. It can help us get a better job or a higher income.

Course & Loan Details

Amount (₹)

Course Fee

₹1,20,000

Loan Tenure

2 years

Interest Rate

12%

EMI

₹5,646

Annual EMI Outgo

₹67,752

Expected Salary Increase

₹4,00,000

First-Year Net Gain

₹3,32,248

 

A financial decision like this can help you in the long run.

 

4. To Avoid Selling Long-Term Assets

 

If you plan to break your FD or sell an investment for an emergency, then it might not be a good idea. As it can lead to losses, penalties, or missed growth. A short-term personal loan can help you in such a situation.

 

5. For Home Renovation

 

You cannot wait on urgent home repairs like leaking roofs. In such a situation, a personal loan becomes your lifeline.

 

Let’s look at an example:

Purpose

Amount (₹)

Loan Type

Processing Time

Repairs & Furniture

₹1,50,000

Personal Loan

2 Days

Home Improvement

₹1,50,000

Standard Home Loan

10 to 15 Days

 

6. Planning A Wedding

 

We all know how big wedding expenses are, especially in our Indian families. Such weddings come with big bills. You can use a personal loan to cover these bills without disturbing your savings or investment plans.

 

Let’s look at an example:

Wedding Budget Details

Amount (₹)

Total Expense

₹5,00,000

Paid from Savings

₹3,00,000

Loan Taken

₹2,00,000

EMI (5 years @ 12%)

₹4,437

 

7. Good Use Vs Misuse Of Personal Loans

 

It is crucial to choose the purpose of taking a loan carefully. If you use it wisely, then it can help you control your finances. And if you don’t use it wisely, you can fall into a debt trap.

Right Use Cases

Misuse Cases

Consolidating high-interest debt

Buying the latest gadgets

Paying for medical needs

Funding a lavish holiday

Career or skill upgrade

Stock market speculation

Home repairs or emergency

Unplanned online shopping

 

8. Key Points To Check Before Applying

  • You must compare the interest rates of different lenders and banks.

  • You must look at the loan processing charges. Typically, it ranges from 1% to 3%.

  • Your EMI can be affected by tenure. A longer tenure will lower your EMI but will increase the total interest.

  • You must check prepayment rules, as some lenders charge 2% to 5% for early closure.

 

Final Thoughts

 

If you see a personal loan as a financial shortcut, then you are wrong. It is a tool. If you use it wisely, then it can help you solve immediate problems, help you grow professionally, and preserve your long-term assets.

 

However, your loan needs to be backed by a proper plan. Before borrowing, you must understand your repayment capacity and only borrow what you need.

 

You should carefully review charges, compare different options, and adhere to your EMI schedule.

 

FAQs

 

1. How soon will I get the money after approval?

Usually within 24 to 72 hours, if documents are in place.

 

2. Do you think that loan approval can be influenced by the reason for taking it?

Yes, lenders prefer essential or productive reasons.

 

3. For how much duration can I opt for a personal loan?

Tenure options typically range from 12 to 60 months.

 

4. Is it possible to get a loan with a monthly income of ₹20,000?

Yes, though the amount offered may be lower.

 

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About the Author

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?

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