Need to put down a deposit for a house? Need to pay for a medical emergency? Need money to plan a wedding? Sounds familiar? Where do you go looking for funds in an emergency? In the Indian culture, it is normal to borrow money from family and friends under such circumstances. However, if you give it a thought, you will find several reasons why this is not the best funding option. It would be a lot better to go for a personal loan than to borrow from friends and family. Let us check out 10 valid reasons why a personal loan is better.
- Clear transaction terms
- No impact on relationships
- No awkwardness
- Pure business deal
- No rush to prepay
- Repayment in easy EMIs
- Retention of self-esteem
- Can get a top-up if needed
- No obligation
- Legally bound agreement
- Clear transaction terms
When you take a loan from family or friends, it is not documented and the terms and conditions are vague. The money is borrowed on an informal basis with a verbal promise to return shortly.
When you take a personal loan you know the total amount, the EMI to be paid and the repayment period. You are aware that you need to repay the loan via monthly payments and are prepared for the same. In an informal arrangement, there is no such discipline and you may end up slowing down the repayment or may promise to return in a lump sum. If circumstances change, you may end up feeling embarrassed.
- No impact on relationships
The moment you borrow money from family or friends, it changes your relationship. No matter how much you claim proximity, friendship or kinship, a money obligation does put a strain. On the other hand, a personal loan is an amount borrowed from a lender at a predetermined interest rate to be repaid in defined instalments over a predecided period of time. The lender cannot force you to repay early or change the terms and conditions. Apart from the burden of making the EMI payment on time, you have no other responsibility towards the lender.
- No awkwardness
Shaking hands over a money transaction is all cool in a moment of crisis but it is a burden that you have to bear till the loan is repaid. If for some reason, there is a delay or you are unable to meet your commitment, it becomes awkward to even meet the person or talk to them. With a personal loan, you are relaxed. You can plan your expenses, optimise your EMI and fit them into your monthly budget. Since you need to pay a third party, you will be disciplined about your commitment and not take it lightly.
- Pure business deal
Taking money from friends or family is not a business deal but more of a personal obligation. Though there is usually no interest involved, the very fact that you are indebted to a near and dear one is onerous. While they may say that you can repay at your own convenience, the fact is that the burden remains till the amount is returned. Since the terms are very loose, people normally tend to put off repayment for long. It slips the mind since there is no pressure or reminder. When you take a personal loan, you know the terms and conditions of the deal and will be prepared for the same. There is no emotion or awkwardness involved and it is a pure business transaction.
- No rush to prepay
When you take a personal loan you are mentally prepared to repay it over a certain period at a pre decided EMI with a fixed rate of interest. You are not obliged to prepay the loan and can continue to pay at your regular pace throughout the tenure of the loan. A loan from friends and family, on the other hand, has no pay by date. On one hand, you may delay the repayment till you have enough funds. On the other, if the other party is in a crisis or your relationship becomes strained, they can demand immediate repayment. That could land you in hot water if you are not prepared. Remember, a known devil is better than an unknown angel. You are better off with a personal loan whose details are known to you than a loan that is ambiguous by nature.
- Repayment in easy EMIs
A personal loan can be repaid in easy EMIs that can be optimised to fit your budget by adjusting the tenure. You can repay the loan in full after 6 months without any prepayment penalty. On the other hand, a loan from a friend or relative is usually repayable in a lump sum with no defined end date. If the lender has a sudden need, you will feel guilty if you don’t return the money. If your circumstances are unfavourable, it will be an awkward situation to handle.
- Retention of self-esteem
When you take a personal loan you are borrowing money for a particular purpose at a fixed rate of interest and predetermined loan tenure. There is no obligation or guilt in taking a personal loan. It is just a financial transaction to take care of your immediate financing needs. Borrowing from a friend or family member is not the same at all. There is a pang of guilt and discomfort and a definite drop in self-esteem till the money is refunded in full. This can be avoided by taking a personal loan and avoiding unnecessary obligations.
- Can get a top-up if needed
If you take a personal loan, you have the flexibility to request the lender for a top-up if the need arises in future. If you have borrowed from family or friends, you would be uncomfortable asking them for money a second time. It would be a delicate situation and you would have to figure out other alternatives. You are much better off taking the personal loan in the first place and keeping your options open.
- No obligation
When you take a personal loan, it is just a business transaction between you and the lender and both parties stand to benefit from it. In a personal transaction within the family, you remain obliged to the lender and it could interfere with your personal freedom in several ways. Why go through this when you can choose the clean personal loan option and be done with it.
- Legally bound agreement
A personal loan is a legally bound agreement between the borrower and lender and neither party can backtrack on the agreement. As long as you do not default on the EMIs, the lender cannot ask you to prepay the loan. Borrowing within the family or from friends has no legal agreement. Tomorrow, if the lender asks you to return a higher amount due to fallout or any other issue, you have no backup to prove your case. You are always better off having the legal paperwork for every financial transaction to avoid hassles in future.
Personal loans are a convenient way to secure immediate financing for any purpose. They are unsecured loans. At LoanTap, you can easily get a personal loan of Rs 50,000- Rs10,00,000 at interest rates starting from 18% per annum for a tenure of 6 months to 60 months. The eligibility criteria is simple. You need to be an Indian citizen or resident over the age of 21 years earning a minimum take-home salary of Rs 30,000.
All you need to do is visit the LoanTap website and fill up an online application form. You need to upload the following documents-
- PAN card
- Aadhaar card/Passport/Driving Licence
- Salary slips of the last three months
- Bank Statement of the Salary account for the last six months
The LoanTap team will assess your application. If your documents are in order and your credit score is good, your loan application will be approved and money disbursed within 24-26 hours.
You can customise your repayment plan according to your convenience. You can prepay the loan in full or in part after six months without any prepayment penalty
Borrowing from friends or family is a bad idea. You are always better off using a formal option for your financing needs. That is the most prudent solution for your short term funding and preserving your relationships.
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