If you have faced a financial crisis, then you must have faced this dilemma of whether to borrow money from your immediate acquaintances, such as your family members and friends, or opt for a personal loan. Although there is nothing inherently bad in borrowing money from people you know, it has some flip sides too. It might affect your relationship. Hence, it is always recommended to keep monetary affairs and relationships separate.
Hence, the wisest thing to do is to apply for a personal loan from an authorised financial institution. To help you understand better why it is wiser to apply for a personal loan instead of borrowing from other individuals, here’s an article that will discuss the reasons in detail. Hence, let’s start right away!
6 reasons to opt for a Personal Loan over other individuals
Following are the 6 reasons to opt for a Personal Loan instead of borrowing money from other individuals:
1. More borrowing options
In times of need, you can secure an instant personal loan from a bank, online lender, credit union, or an instant loan app. Depending on your requirements and eligibility, you can choose any option from the above-mentioned lending platforms. However, when borrowing money from individuals such as your friends or family, you might need to find out who would be willing to lend you money.
2. Personal Loans have clearly stated terms and conditions
An unorganised borrowing, i.e., a loan from either family or friends, usually involves a verbal arrangement and isn’t equipped with clear terms and conditions. Although both the involved parties might have the best intentions, it is always possible that with time any one or both involved parties might forget some of the details of the loan agreement. This can lead to confusion and stress.
On the other hand, a personal loan is a vividly documented financial transaction between the lender and the borrower. Since it is a written agreement, it leaves no room for confusion about the loan terms and conditions, interest rate, and tenure.
Unlike unorganised borrowing, which usually doesn’t have a well-defined and pre-determined repayment schedule, a personal loan, on the other hand, allows you to be well-informed about your loan repayment schedule and the exact amount of EMI that you need to pay regularly. It is a legally binding contract that protects the financial interests of both the lender and the borrower and ensures transactional transparency.
3. Borrowing from acquaintances can put a strain on the relationship
Borrowing money from other individuals, such as your friends and family, can be risky. This is because once you borrow money from one of your acquaintances, the monetary matters now involved can put a strain on your relationship. If you fail to return the money on the verbally agreed-upon date, it can damage the relationship.
Also, the lender himself might end up in a financially tight spot and ask for the loan amount from you earlier than the agreed-upon date. If you are unable to return it as per the whims of the lender, your relationship with the lender might turn sour.
Moreover, when you borrow money from your family or friends, the borrowings are generally interest-free. This means the lender doesn’t get to earn anything from the loan arrangement. While this might sound attractive initially, it might cause trouble later. The lender might later regret lending the money or demand an unreasonable amount as interest.
4. Personal Loans can help you build a credit history
Another glaring disadvantage of borrowing money from an individual rather than from a financial institution is that you won’t be able to build your credit history. By taking a personal loan from an authorised money lending institution such as a bank or online lender helps you build a good credit history. A good credit history, in turn, will help you to qualify for better rates on your future loans and lines of credit.
5. A Personal Loan doesn’t come with any obligations
The best thing about personal loans is that you can use the loan amount for a wide range of purposes, including making home improvements, consolidating debt/debts, or funding a major purchase. This flexibility qualifies personal loans as a versatile option for borrowers. Moreover, the lender of a personal loan won’t ask you or supervise where you are spending the loan amount.
However, if you borrow from individuals such as a friend or family member, you might feel obligated to inform the lender where you will be spending the borrowed fund. This might also elicit some kind of disapproval from the lender, provided the lender finds your cause for borrowing unconvincing.
Moreover, borrowing from an acquaintance keeps you indebted to them long after you have repaid the debt amount. You might be reminded now and then about the favour that you owe them, and also, you might be forced to help them whenever they are in need. To avoid such awkwardness and obligations, opting for a personal loan is always better.
6. You can borrow the exact required amount from one lender
If you want to borrow a hefty amount, then applying for a personal loan makes more sense. This is because authorised money lending institutions will lend you the exact amount of cash you need. However, there are chances that if you ask for a hefty amount from an individual such as a family member or a friend, they might refuse to part with such a huge sum.
Moreover, they might not even have enough cash to lend the amount to you. If that is the case, you might end up borrowing money from more than one individual, further complicating your financial matters.
Now you might ask, “which is the better option?” However, there can be no definite answer to this question because it wholly depends on your situation. That being said, it is always considered wise to consider personal loans’ advantages. Moreover, now you can easily apply for an instant personal loan from Piramal Capital and Housing Finance Limited.
It is a registered finance company that offers quick, hassle-free and easy personal loans with zero foreclosure and prepayment charges. Their team of expert advisors would help us through the entire loan application process, thus ensuring fast approvals and quick disbursals in your account. They also guarantee minimum documentation and pocket-friendly monthly EMIs. Visit the official website of Piramal Finance now!