Personal Loan For Holidays: A Very Bad Idea
Need a loan in a hurry? Just avail a personal loan. A personal loan is more than just a loan. It’s an emergency loan. You and other citizens love personal loans for a number of reasons…You don’t have to give any reason to the bank while availing a personal loan. Then, you don’t have to give any collateral/guarantee while availing a personal loan. There’s more good news…You don’t need a guarantor while availing a personal loan. But, does this mean you must avail a personal loan for just about anything?
Personal loan is a very good idea only for an emergency. You or any of your family members has a medical emergency? You must avail a personal loan. You and other citizens could avail a personal loan for the wedding expenses of your son/daughter as a last resort. But, is availing a personal loan to buy a laptop you don’t need or going on a holiday/vacation a good idea?
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Is a personal loan for a holiday a good idea?
You can avail a personal loan without giving any collateral/guarantee to the bank. Then….the bank gives you a personal loan, without asking you why you need it. Yes, you can easily get a personal loan for a vacation or even a holiday abroad. But, should you take it? Yes, the bank does not demand any collateral for the personal loan. But in exchange for this benefit, the bank charges you a very high interest on the personal loan.
Before availing a personal loan understand the difference between a good loan and a bad loan. If you avail a personal loan to meet an emergency, it is a good loan. But, if you avail it to go on a holiday, it becomes a bad loan.
You and a number of our citizens are availing personal loans for holidays and vacations. This is a very bad trend. Before going on a holiday ask yourself, Do you really need this holiday? Follow this simple rule while going on a holiday. Go on a holiday only if you can afford it, without having to borrow from friends and family.
Should you avail a personal loan for a holiday?
The worst possible thing you can do? Avail a personal loan to go on a holiday. You go on a holiday and enjoy yourself. Then the problem begins…You have to repay the borrowed amount along with the high interest. You struggle to manage daily finances. How will you manage the loan repayments? Soon you will fall behind in repayments and default on the personal loan. You land in the debt trap.
Let’s stop for a moment and ponder….Is it worth falling in the loan trap, just for a holiday? What are the consequences….
1. Your credit score gets affected
Before a bank lends you money, it wants all information on your past repayments. This is called credit history. Whenever you avail a loan and make repayments, banks send information on your repayments (how regular you have been in repaying the loan), to credit agencies. Depending on your repayment track record, these credit agencies assign you a credit score. If you do not make repayments in time, your credit score is badly affected and no bank will give you a loan.
What if you need a loan very badly? You want to avail a home loan to buy your dream home? You will not get this loan.
2. You would be forced to avoid relatives and friends
What would happen if your relatives and friends came to know you were struggling to repay the personal loan? You would have to hang your head in shame, whenever you met them. You would be forced to avoid family functions, marriages and parties.
Your social life would go for a toss. All this headache just for a holiday?
3. Investing could get difficult
How can you invest your hard earned money and grow rich if you are busy repaying loans? If you have availed a personal loan, you must repay it at the earliest. You cannot invest, until the loan is repaid.
Which investment can give a higher return than the interest you pay on the personal loan?
You go on a holiday to enjoy yourself. Now, you will return from your holiday and undergo a stress test. The stress of repaying your personal loan. This could even affect your health. All this for a holiday? Is it worth it? You be the judge. Be Wise, Get Rich.