A personal loan is one of the easiest ways to acquire money when you need it. Although you can use an open-ended loan for almost whatever you desire, you should think about the risks of taking a personal loan before you sign the contract. It includes early-payoff penalties, privacy concerns, insurance pitch, and so on.
Personal Loan Risks
Here are some possible risks.
Personal loans are unsecured, which means lenders charge higher interest rates compared to secured loans like home or car loans. This can significantly increase the total repayment amount, especially if the tenure is long.
Easy availability can lead to over-borrowing.
Multiple loans or frequent top-ups can result in debt accumulation, making it hard to manage monthly EMIs.
Failure to repay on time, even a single missed EMI, directly affects your CIBIL score. A low credit score not only reduces your chances of future loan approvals but may also lead to higher interest rates on future borrowings.
While some lenders offer flexible repayment, others impose prepayment penalties, foreclosure charges, and high processing fees, which increase the cost of borrowing.
I hope you found this helpful.
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What are the Risks of Taking a Personal Loan?
shagun
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7 months
2025-05-17T16:06:50+00:00 2025-05-17T16:06:51+00:00Comment
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