Financial Advice
When Does It Make Sense to Take a Personal Loan?
Not all loans are created equal. Learn when borrowing makes financial sense — and when it doesn't.
Lendela Team ·
Good reasons to borrow
- Consolidating high-interest credit card debt: Personal loan rates (6–10% EIR) are typically lower than credit card rates (25–28% p.a.).
- Medical emergencies: When you have no other liquid assets.
- Home renovation with clear ROI: Improvements that increase property value can justify borrowing.
Situations where you should pause
- Discretionary spending (holidays, luxury goods): If you can’t afford it from savings, borrowing is not the answer.
- Investments: Borrowing to invest is a high-risk strategy that can amplify losses.
- Topping up an existing loan: This can trap you in a cycle of debt.
The affordability test
Before applying, answer: Can I comfortably make this monthly payment for the full loan tenure, even if my income drops by 20%? If not, reconsider.