Borrowing Funds: The Best & Worst Ways to Do So

At some point in your life, you will need to apply for a Personal Loan to meet some immediate financial obligation in life. Nowadays, it is common for people to receive a phone call from a telesales professional stating that they have a pre-approved Personal Loan. So, should immediately take up the offer? Well, there are good and bad ways of borrowing funds, and you should be aware of them so that you make an informed decision when taking a Personal Loan.

Credit Card

It is easier than ever to get a Credit Card these days. However, it is not financial sense to borrow money through your Credit Card. You will find out before long that drawing money using your card will be one of the most expensive loans you ever take.

Credit Cards come with a higher interest rate compared to any other type of loan. You can expect to pay anywhere from 22% to 48% per annum as the interest rate on your Credit Card dues. So, before you know it, your small loan will skyrocket, trapping you in a never-end circle of debt. That is why you should always make an effort to clear your credit card due on time.

If you want to use your card to make a big purchase, like an appliance or electronics, it is best to refrain from it. Instead, you will be better off applying for a Personal Loan that has lower interest than a Credit Card. Just use your card to buy things that you can comfortably pay off at the end of each month.

Home Equity

A couple of decades ago, it was not the norm for people to use their home equity to borrow cash. However, the younger generation which has entered the job market a few years ago and owns a home has no qualms about encashing the equity that it has built.

People are refinancing their Home Loans or taking a home equity loan to meet lifestyle needs, like paying for marriage or funding overseas education.

Home equity allows borrowers to withdraw a lump sum at a fixed interest rate and repay the amount over a specific period. The method of borrowing has more favourable interest rates, but you if you cannot keep up with the repayments, you risk losing your home. So, think through carefully before you decide to cash in the equity you have built in your home.

Personal Loan

Thanks to the internet, it is possible to Get Instant Personal Loans Online. These loans are unsecured and do not need collateral. Hence, they are attractive to borrowers, who do not have security or equity. However, these loans come with a higher rate of interest compared to home equity.

With people getting a pre-approved Personal Loan, it has become commonplace for younger adults to take out Personal Loans to meet their short-term needs. The interest rate varies from bank to bank, but if you have a good credit score and repayment capacity, you will be able to negotiate an attractive rate.

The Bottom Line

There are many different ways of meeting your funding needs in India. However, you should weigh the pros and cons of each loan option before going ahead. Remember, as tempting as your Credit Card may be; it is best to avoid taking an overdraft. If you are unable to make the payments, you will spoil your credit score, and this will make you ineligible for loans in the future.

A pre-approved Personal Loan is one of the best options, as you don’t need to put up collateral. However, here too, you have to keep up with the monthly EMIs (Equated Monthly Instalments), or you will get labelled as a defaulter. As a result, your credit score and creditworthiness will be adversely affected.

If you are looking to borrow funds, connect with the financial experts at My Money Mantra. They will guide you and ensure you choose the best possible option for your needs.

Also Read: From Health to Travel: One Loan for All Purposes

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.

Show More

Related Articles