Personal Loan

Should You take a Personal Loan to Repay Your Debts?


Paying debt regularly is your responsibility but sometimes the pile is so huge that it becomes difficult to manage everything. Do you want to repay your debt by applying for a personal loan? Do you want to know whether you should apply for a personal loan to just repay your debts or not? If yes, then keep reading this article to know the pros and cons and take an informed decision.

What is a personal loan and what is the purpose of applying for it? 

A personal loan is a financial aid in which you borrow money from a lender for a set period and in return, the lender charges you a rate of interest. You can use this borrowed money to buy a new house, finance a marriage, plan a family trip or simply meet high-end expenses. This loan is solely for you if you want a lump sum amount to invest in something and then repay it in the form of instalments. 

There are many reasons why you might consider applying for a personal loan. The first reason is to fulfil your dreams or desires which you had for a long period. It would be buying your dream car, financing your child’s higher education, etc. But for repaying your other debts as well, like a home loan, you can think of taking a personal loan

What are some of the benefits of applying for a personal loan? 

There are numerous benefits of applying for a personal loan in India:

  • Low rate of interest:

Banks often charge you a low rate of interest on the loan amount to ensure that you easily pay the debt. The rate of interest starts from 8.5% per annum and goes up to 35% per annum, depending on your credentials, credit history, and the bank you prefer. 

  • Quick disbursal:

Just after you get the approval from the bank, you get the loan amount in your hand instantly. As soon as you get the loan, you can start using the money as per your requirements. 

  • The long tenure of repayment:

The tenure of repayment is often long, which ranges between one year to six years. So, you get ample time to repay your personal loan according to your convenience. Some banks allow more but mostly it depends on your credentials and the offers. 

  • High loan amount:

The loan amount is also quite on the higher side, which is often about 30 to 35 lakh rupees. In some cases, even the limit can cross 40 lakh rupees if you have a very good credit score. While taking a personal loan, banks check your credit score and if you have a credit score of about 750 or more, then you will have a higher personal loan amount at a lower rate of interest. 

  • Payable instalments:

The equated monthly instalments or EMIs are often very less and easily payable as the rate of interest is low. This is another advantage of applying for a personal loan because it addresses your convenience. 

  • Zero to minimal processing fee:

The processing fee is also negligible and there are no other extra charges like stamp duty, prepayment charges, statutory charges, etc. 

Should you take a personal loan to repay your existing debts? 

To just answer this question in a single word, it is “yes”, but there are other aspects to it as well. 

Debts can mount over some time and without you even addressing they can sum up into a huge pile. Over time repaying all of that money might put you in a tight spot. So, to avoid all these odds you can consider applying for a personal loan. As the rate of interest would be low and the tenure of repayment will be long, it could be a good strategy. 

However, make sure you check the following points to decide whether you should opt for a personal loan or not:

  • If you have maxed out your credit card:

Because of wrong anticipation or a series of expensive months, you might have reached the maximum limit of your credit card. If that is the case and you need some urgent money, consider taking a small amount of personal loan. Try not to take a huge loan amount for any reason because this is also a form of debt. 

  • If you have borrowed from your relatives:

You might have borrowed a lump sum amount of money from your relatives which you have to pay back. In that case, you can give a personal loan a go. Try to apply for the exact amount that you have borrowed, do not apply for a huge amount unreasonably. 

  • Other forms of loan:

You might have urgently borrowed money from a lender or from an informal source that charges you a high rate of interest. Now, with time it might bank on your shoulder and you want to get rid of it. So, in that case, as well, you might consider applying for a personal loan. But make sure the loan amount doesn’t exceed what you need. 


Yes, you may take a personal loan to repay your existing debts but there are other things to keep in mind. If the existing debt is from an informal sector or you took it on an urgent basis, then you should apply for a personal loan. But, if the debt has a low-interest rate and isn’t causing much trouble, then you shouldn’t because a personal loan is also a debt and it won’t do any good further. 

So, decide what type of debt you want to clear and then think of taking the loan. You can use a personal loan calculator to estimate the interest rate and the tenure. 

Piramal Finance has a lot of engaging and informative content on similar topics. You may visit the link today for expert suggestions and opinions on personal loans.