From wants to worth it: Nine questions to ask before taking a personal loan

Bengaluru ;In today’s evolving financial landscape, personal loans are no longer seen purely as emergency lifelines. For many young Indians, they have become tools for growth — whether to upskill, launch a side hustle, manage milestone expenses, or invest in career advancement. However, while access to digital credit has become faster and easier, financial experts stress that the real power lies in asking the right questions before borrowing.

Industry insights, including findings from a recent mPokket survey, suggest that nearly 40% of young Indians are using credit for forward-looking goals such as education, professional growth, and lifestyle improvement. But responsible borrowing begins with clarity of purpose.

The first and most crucial question borrowers must ask is whether the loan is funding a meaningful investment or merely satisfying a short-term want. Financial planners point out that borrowing works best when it builds long-term value rather than short-lived gratification.

Affordability is another key factor. Experts advise borrowers to carefully assess how equated monthly instalments (EMIs) will fit into their income after accounting for essentials such as rent, groceries, and savings. A well-planned EMI structure can improve budgeting discipline, but overstretching finances may lead to stress.

Transparency around costs is equally important. Beyond the principal amount, borrowers should evaluate interest rates, processing fees, and potential late payment penalties. Understanding the total repayment obligation upfront can prevent unpleasant surprises later.

For many young earners, a personal loan represents their first formal step into the credit ecosystem. Data indicates that 32% of young borrowers have started building a credit history to strengthen long-term financial stability. Used responsibly, timely repayments can enhance credit scores and unlock better borrowing opportunities in the future.

However, unpredictability remains a reality. Job transitions, medical emergencies, or family obligations can disrupt repayment plans. Experts recommend maintaining a small financial buffer to manage EMIs during unforeseen circumstances.

Despite the speed of digital lending platforms, financial advisors caution against rushed decisions. Reading the fine print, setting repayment reminders, and opting for auto-debit facilities can help borrowers avoid penalties and maintain financial discipline.

Importantly, emotional impact matters too. Surveys reveal that 63% of young Indians feel more in control of their finances when credit is used wisely. A well-considered loan should offer empowerment and clarity, not anxiety.

Ultimately, personal loans are neither inherently good nor bad. Their impact depends on intention and planning. When borrowers move from impulse to informed decision-making, credit can transform wants into worthwhile investments — supporting not just present needs but long-term aspirations.