Different people have different notions of debt and borrowing. While someone might consider it okay to borrow money for all things big and small, others might be strictly against the borrowing of any sort. However, certain situations in life leave no option but to take a loan. Similarly, the widespread misconception that taking a loan is not good for your finances couldn’t be farther from the truth. 

The truth is that debt, when used correctly, can help you in many ways – like helping you grow your business, get you or your child quality education, help you buy a home that you always dreamt of, improve your quality of life, and invest in a lucrative business opportunity.

However, if misused, a loan could also get you trapped in a vicious debt cycle that can be hazardous for your financial health. Thus, it is important to remember that some debt is good as it helps you in your economic growth and also to save money, but the wrong kind of debt can be debilitating and cause a lot of harm to your financial plans.

That is why, before you borrow an amount, ask yourself if the expense is justified and whether you are in a position to repay it on time. As long as you are clear about your short-term and long-term financial situation, there is no harm in borrowing money.

Is it a Good Idea to Borrow Money? 

A long list of responsibilities accompanies us into adulthood. However, not everyone has the means or resources to take care of all these responsibilities in one go. For instance, few people have the capital to purchase a house by paying the entire amount. Thus, people borrow from their friends, family or the bank to fulfil these responsibilities today and repay the loan over a longer duration, thus spreading out the expensive purchase over a few years. So, there is nothing inherently wrong with the concept of borrowing money from others; you must be in able to pay it back on time, along with interest. 

While borrowing money can help you meet your short-term financial goals, it does have a positive and negative implication in the long run. So, before you fill in that application for a loan or call your relatives, read these few pros and cons so that you know how big a responsibility you are getting ready to shoulder: 

Pros of Borrowing Money

  • You Get a Large Amount of Funds Quickly

This is one of the most significant advantages of borrowing money. You get access to a lot of money within a short period of time, and you can use the same to meet your needs and requirements. Usually, borrowing money from a financial institution can give you access to a larger sum of money than what you can borrow from friends and family. 

  • Flexibility

Another advantage of borrowing money from a financial institution or someone in the family is that the repayment process is flexible. Since the loan is broken into smaller EMIs, you get the flexibility to repay the loan over a prolonged period of time instead of a single payment. 

  • Low-Interest Rates

The BFSI industry has several private players, which means that there is intense competition among them. This has resulted in lower interest rates, attractive benefits, and added discounts for borrowers in today’s economy. Furthermore, if you borrow money from your family or friends, they might just forego the interest, which can help you save a considerable sum of money. 


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Cons of Borrowing Money

  • High-Interest Rates

While most banks and other financial institutions levy similar interest rates on loans, certain kinds of loans evoke a higher interest rate than others. For instance, personal loans, which are unsecured loans by nature, are usually available at a higher interest rate due to the increased risk factor for the lender. Thus, if you take an instant personal loan, you might have to pay higher interest than other loans. 

  • Affects your Credit Score

If your EMI is high, and you fail to pay it on time, there is a chance that your credit score will be impacted. Remember, if your credit score goes down, it will affect your creditworthiness, which will make it difficult for you to get loans in the future. Do keep in mind that loans with shorter durations are the riskiest as if you miss the strict payment deadline, your credit score can come down. 

  • Lengthy Application Process

In most cases, the application process, especially if you are applying for a business loan, is lengthy and complicated. This is because the banks try to make sure that they eliminate all risk factors by undertaking an extensive background check and verification process. In most cases, banks also require the submission of collateral or securities as a safeguard for the loan. This means that people without valuable assets are left without an agency to avail official credit. 

Circumstances When It Is Okay To Borrow Money

  • To Get An Education

If you are a parent and worried about your child’s future because he or she is about to complete school and step into college, a loan could be an excellent option for you if you don’t have the required savings. Almost all banks in India provide education loans to help the student fulfil their dreams.

Most banks and financial institutes not only offer lower interest rates on education loans but also have longer repayment schedules. Since your child will be better placed to land a higher-paying job after completing their education, repaying the loan is also not as daunting as in other cases. 

  • To Manage Medical Emergencies

Medical emergencies can arise any time without warning, and so it is difficult to be adequately prepared if you are caught off-guard. If you don’t have the money you need or don’t have medical insurance that covers the emergency, then borrowing money is inevitable. Several banks and lenders, like PaySense, offer medical loans to help you take care of medical emergencies without worrying about the high bills. However, make sure you understand the terms and conditions of the loan before borrowing it. 

  • To Travel

Today, there are a lot of banks and other financial institutions that offer unsecured personal loans that do not require you to provide any collateral. You can use the amount for any purpose – you don’t need to state any reason to apply for the loan. The repayment process is also easy, with small EMIs that need to be paid every month. So, if you’ve been thinking of taking a trip or taking your parents for a pilgrimage, a travel loan might just be what you are looking for. 

  • To Consolidate Existing Loans

If you’ve taken multiple loans in the past few years and use several credit cards, it might be a good idea to take one loan with a high amount to pay them all. Consolidating loans not only helps in managing debt better but can also save you money if you are paying higher interest rates. With this, you will need to pay only one EMI every month instead of the multiple ones that you had to pay earlier and save you bookkeeping efforts. 

  • To Start Your Own Venture

If you are an aspiring entrepreneur who wants to start a venture but doesn’t have the required money to take that giant leap, borrowing money could be a good option for you. A lot of banks and angel investors can fund your business idea and help you kick start your own business. And once you establish your own business, it will be easier to pay off the debt because you will have a steady inflow of revenues. Thus, business loans and investments, if managed well, are one of the best kinds of debt, as they help you increase your wealth. 

  • To Tackle Financial Emergencies

Life is full of ups and downs, and sometimes, amidst all this, life brings you sudden unexpected economic challenges that require your immediate attention and cannot be put away for later. These could range from an unforeseen medical expense, a legal expenditure, or even running your business. So if you don’t have the means to take care of them, you can, fortunately, take help of external funding to tackle the crisis. Several banks and financial institutions offer personal loans to ride out the tough times. While these loans have a higher interest rate as compared to others, they provide instant access to funds that can be used flexibly. 

  • To Expand Your Business

If you an entrepreneur who wishes to grow their existing business, borrowing money might be a good option for you if you don’t have the funds in your account to fuel the expansion. After all, with the money that you borrow, your business can grow in leaps and bounds, which can further lead to more sales and higher profits. So, if you need to expand your business, considering getting a small business loan to gain momentum in your business. As you grow and make more profits, you will be able to repay the loan without much problem. However, have a solid plan as to how you want to use the funds to expand your operations with minimal risk.

  • To Improve Your Credit Score

Securing a loan is impossible if you don’t have a good credit history and a high credit score. However, you can improve your low credit score by borrowing small loan amounts and repaying them on time. Similarly, you can use a credit card regularly to improve your creditworthiness and improve your eligibility for future loans. Remember, it is critical not to miss a single EMI and be on time each month. A high credit score comes with several significant benefits, like improved chances of loan approval, shorter disbursal periods, lower interest rates, and increased flexibility. 

PaySense: The Best Way to Get a Personal Loan


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Click Here to Apply for Instant Personal Loan from the PaySense Website.

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PaySense offers instant personal loans up to Rs. 5,00,000 without any collateral or security. You need not even have a high credit score to avail a loan from PaySense. The best part is that the entire application, approval, disbursal and repayment process is done digitally, and can be managed from the PaySense mobile app. PaySense also offers an easy-to-use personal loan EMI calculator to help you select the best repayment plan for your loan amount. In addition to offering some of the lowest interest rates on personal loans, PaySense has no hidden charges or fee. Thus, not only do you get instant access to funds, but you are also free to use them as per your requirement. PaySense loans truly are the best way to get a personal loan

While no one prefers to borrow money from others, the truth is that many situations invariably require the exchange of funds in the form of loans and credit. As discussed, if used judiciously, a loan can be used to improve one’s creditworthiness, value, business, and self-worth. However, if mismanaged, a loan can result in a messy financial challenge. While we have touched upon only a few of the reasons why people might borrow money, you might find yourself in a unique situation that isn’t listed above. Before you apply for a loan, ask yourself how much amount you really need and if you can comfortably repay it as per schedule. If the answer to both these questions is in affirmative, you have nothing to worry about.  

If you require immediate funds, get the PaySense mobile app and create your profile to determine the loan amount you are eligible for. If you want to know more about personal loan, please get in touch with us on [email protected]

Shivam Abrol

Shivam is a passionate content writer with Masters in journalism. A mutiple-award-winning writer, he brings over a decade of experience as a BFSI writer. In fact, he himself is known in his circle for sound financial advice. A writer by day and a reader by night, Shivam enjoys researching and writing on various financial topics, including credit, stock market, crypto, taxes etc. When he is not spending his time penning down an informative article or opinion, he can be found playing with his kids or collecting stamps.

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