A personal loan is one of the most popular loans in the Philippines today. Many people are interested in taking this type of loan for any of their needs. When you are in an emergency financial situation, you can consider taking this loan to support your needs.

However, you need to calculate your budget and your personal income every month before you take this loan. It will be damaging when it is used for the wrong reasons. A personal loan can be bad when it is used for the wrong reasons. Here are some situations when you should never take digido.ph/articles/personal-loan as your backup plan.

Use a personal loan for paying the basic needs

Basic needs should be covered by your regular monthly income. For many Filipino families, it may be difficult to cover their basic needs with a regular income. According to the NEDA or National Economic Development Authority, a family of five people needs to have at least PHP 42,000 every month to live comfortably.

It can be broken down into several needs, such as PHP 3,150 for getting the 25 kilos of rice, PHP 17,160 for buying any other types of food, and also PHP 21,840 for buying non-food items. When you take a loan for covering this need, you will have to pay additional costs from the loan processing fees and also interest charges.

For example, when you take a PHP 40,000 loan, you will need to pay at least PHP 1,200 as the interest and also PHP 1,500 for the processing fee. The cost will increase from time to time when you have a longer repayment period. Basic needs are actually recurring expenses that should never be paid off with a personal loan.

Getting a loan without a clear repayment plan

This is another situation that you need to avoid when you are planning to take a personal loan. Many borrowers want to take out a loan without a concrete plan to pay the loan back. When you don’t have a clear strategy to repay your loan, it will be bad for your financial health.

The possibility of getting a missed payment will be really high. At the end of the day, you will realize that you will pay an expensive cost from the processing fee and also the interest. When you don’t have a solid and clear repayment plan, you should never consider taking a personal loan. It is recommended for you to find other income sources by doing any other beneficial activities, such as getting a side job, offering paid services, selling products, etc.

Getting a personal loan for the investments

Investing is an activity for allocating resources, including money. When you have enough money in your pocket, you can consider dividing your money into several accounts. However, some people want to do some investments by using personal loans. It will be bad for you to use a personal loan for the investment. You need to understand that not all investments can guarantee returns.

Many investments can fail. When it happens, you will end up with a failed investment plan plus the interests and the fees. You also need to pay back the loan which can be a burden for your finances. You also need to consider the total amount of money that you will get from your investments. Borrowing money for the investments will be good if the profits from the investments are higher than the loan costs.

Getting a personal loan for paying any unnecessary expenses

A personal loan will be considered a bad choice when you are using this loan for paying for unnecessary items, such as expensive gadgets, parties, getaways, and any other unnecessary stuff. If you cannot afford any of these items with your regular monthly income, you should delay your choice to buy any of these items. There is nothing wrong with treating yourself with any of these items, but borrowing money for these items will cause you to have a stressful life. Compulsive shopping with a personal loan will be a temporary solution for you.

Sean Martin D. Plantado, head of the customer service for Digido.ph, notes that the easy availability of credit tempts people to borrow even for pointless expenses. This attitude prevents them from developing financial discipline, building a good credit rating, and fostering a savings habit.

A personal loan is not a bad choice, especially when you are ready to plan everything in advance. When you have a clear repayment plan, you can get a lot of benefits from your personal loan.