Why Taking Out a Personal Loan for a Vacation is a Bad Idea?

Why Taking Out a Personal Loan for a Vacation is a Bad Idea? - Personal loan is a type of loan used by the people for meeting the personal needs of the borrower. There are no restrictions as to how and where the funds taken as loan can be utilized in case of Personal Loan. Similarly, it can also be used for a vacation trip very easily.

It is a good option to get money for your urgent and personal needs to avail a personal loan but at the same time you should realize that it does this mean that you should avail it for just about anything. You must think wisely whether it is really required to get a personal loan for that specific reason.

Personal loan is available to any person having a regular source of income. A healthy Credit Score will be an added advantage in procuring a personal loan. Though it is available to you instantly and with minimal documentation, it should be noted that you have to repay the same with a very high interest.

Personal loan is a type of loan used by the people for meeting the personal needs of the borrower. There are no restrictions as to how and where the funds taken as loan can be utilized in case of Personal Loan. It can be used for any business purpose, for personal use such as purchase of any asset, marriage expenses, medical emergency, children education, etc. Similarly, it can also be used for a vacation trip very easily.

There are two types of loans i.e. Good Loan & Bad Loan. Before availing a personal loan, it is always necessary to understand the difference between a good loan and a bad loan. If you avail a personal loan to meet an emergency which needs personal loan urgently & no other better available alternative is there, then it will be considered a good loan. If you want to avail a personal loan for just going on a vacation, it is considered a bad loan.

Going on a vacation on debt is never a good idea. If you just avail a personal loan and go on a holiday for enjoyment of a very small period of time, then you will have to face problems afterwards when your holidays are over. After that you will need to repay the loan amount with the high interest.

Interested to know: Tips to Choose Right Personal Loan for You

Personal Loan for Vacation should be avoided for the following reasons:

Face Struggle to Manage Daily Finance

Suppose you take a personal loan of Rs 3 lakhs at 14% for3 years for going on a foreign trip with your family for a week.

After your return, your EMI of Rs 10,253 will start immediately and you will have to keep paying this EMI for 36 months. In that way, you will be paying Rs 69,118 as an interest on the principal amount of Rs 3 lakhs.

Then you will find it difficult to manage your daily finances as you could have done easily, if you would not have availed personal loan just for enjoyment of one week.

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Negative Effect on Credit Score

Suppose you do not find yourself in a position to repay your personal loan in due time or you have made some delays in paying your EMIs, it will hurt your Credit Score. Your credit score may turn poor in such a scenario and you will not be able to avail further loan for purchase of home or a car, etc. in future.

Difficulty in Investment for Future

The amount gone in repaying your personal loan, taken for going on vacation, which you need to pay for say next 3 to 5 years, will certainly hamper your investments. This can affect your financial health badly and you will find it difficult to achieve your financial goals which should have been your priorities.

Do you feel all this worth for a vacation? The answer is certainly "No". So think wisely and then only opt for a Personal Loan, even if it is available very easily & instantly.

Suggested reading Is it Beneficial to Prepay your Personal Loan?

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