10 Ways Low Income Earners Can Use Personal Loan Effectively
For years we have been taught that applying for a personal loan is a disaster for personal finance especially for a low income earner. Because of the high interest rate that comes along with the personal loan.
However, a personal loan for low income earner can be an incredible tool not only for their financial growth but also to meet goals. The secret lies in defining two things: how to use that money and where/under what conditions, low income earner gets a personal loan.
Note that there are many financial institutions offering loan for low income earners having income less than Rs. 15,000.
So here are 10 effective ways low income earners can use a personal loan:
(1) Pay off a debt
Though it sounds completely illogical but yes, low income earners can get out of a major debt by taking a personal loan. Choose a debt that is causing you the most problems: generally the one that has the highest interest rates should be paid off first.
(2) Medical emergency expenses
Unforeseen events happen, whether people like it or not and many a times it hurts the finances badly and the impact is severe in case of poor income earner. And often such individuals do not have enough money to meet the medical expenses. A personal loan for low income earner is a great way to get out of a medical emergency, if health insurance is not available. Paying for hospitalization expenses, medicines, nurses…etc. will become easier for individuals with poor income.
(3) Money for children’s education
Education is the most important asset anyone can pass on to their children, as it will help them face life better. And especially for a low income earner their children are their only hope for a better future. However paying for college can be expensive for such parents. But personal loan can make children’s college education possible.
(4) Educate by enrolling for higher studies
Just because an individual is earning less doesn’t mean they cannot educate themselves further. For e.g. They can enroll into postgraduate studies for advancing their career which will offer them better opportunities i.e. better income. Updating knowledge is one of the best investment anyone can have in life, which guarantees higher income, provided it is done with complete dedication and efforts.
(5) Start own business
Each one of us has a dream, be it a rich or poor person. It’s what you do to achieve your dream that matters. Everyone at some point of time want to have their own business. They have the idea and the desire to do it. But lack the money is the bottleneck. And personal loan is what you need to make it happen. It is one of the best idea to invest loan amount into the business. And you will see the money literally working in your favor. There are many lenders offering loan for business for poor earning individuals (minimum income required is Rs. 5,000). In addition, profits earned from the business can be used to repay the EMI.
(6) Improve parents’ lives
We know that honoring your parents and everything they have done for you throughout your life cannot be measured. By spending the personal loan amount on giving little better lifestyle to their parents, low income earners will get priceless satisfaction.
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(7) Travel with whole family
Stop seeing travel as something that only people with enough money can do. In fact, stop seeing money as something that is only used for tangible things. Traveling will nurture low income earning individual (infact everyone) as a person, teach new experiences, bring good memories that will influence their self-esteem and perception of the world. These are the benefits personal loan for low income earner can offer to the borrower and his/her family.
(8) Home Remodeling
Caring for your family’s wealth is a task that should be taken seriously and what better way than remodeling the house. The reason goes beyond making them feel comfortable opening a new space: with remodeling, you increase the value of your property. Adding value to your home is a great investment i.e. in the short term you start living in a improvised home and in the long term, the value of the house increases.
(9) Decorate House
Living in a space that makes you feel happy is one of the things that have no tangible value, but anyone can feel and enjoy every day. If poor earning individual has dreamed of redecorating his/her home but do not have enough money, then it’s time for low income earner to take out a personal loan and fulfill the need.
(10) Buy a Four Wheeler
Today, owning a car has turned from a luxury to a matter of necessity. Although this may not be a necessity for a poor earning individual. But it saves time, money on public transportation, they can go on vacation, among others. And in spare time, they can earn extra income by offering cab service by becoming driver with Ola and Uber. Car is an investment whose advantages will be seen practically every day.
Although many of the points listed above may not make sense for every low income earner (especially points 6 – 10) as all these depend on the loan amount and also everyone’s condition and objective in life is different. But the list is good guide for anyone looking for prioritizing on how to spend the loan amount.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).