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Can a Personal Loan Help You Avoid Breaking Long-Term Investment Commitments?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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During a financial crunch, many find themselves tempted to dip into savings set aside for the future. However, when you've decided to grow your wealth steadily over time, the thought of temporarily breaking that chain feels like a step back. This is where one considers whether a personal loan can act as a bridge instead of pulling out funds prematurely.
People consider selling their long-term investments out of urgency. They may need money right now and other options like selling off investments seem like the quickest solution. But while it may feel convenient at that moment, it often comes with hidden downsides.
For example, if you’ve put money in an ELSS fund or a fixed deposit with a 5 year lock-in, withdrawing early could result in penalties or tax implications. On top of that, you lose out on the potential returns you were aiming for when you chose that financial path.
A personal loan if taken responsibly, allows you to meet that immediate need without disturbing your financial roadmap.
When should you take a personal loan?
This really depends on what you’re using the funds for and how confident you are about repaying the loan on time. If your investment yields a steady 12% annually and the personal loan interest rate you’re offered is around 10.99% to 14% then it’s worth it. But even beyond numbers, there are other reasons to take this route:
Once you liquidate an investment, it's hard to rebuild it at the same pace. Most people tend to use that amount completely and delay restarting it. A personal loan helps you preserve that habit of long term saving.
The loan becomes a short-term commitment while your investments stay on track in the background.
Since personal loans are unsecured, you don’t have to pledge any assets. This makes them easier to access during financial crunches.
Let’s say you’ve invested ₹10 lakhs in a long-term mutual fund with an expected return of 12% CAGR. Liquidating it today could not only disrupt your goals but also result in an exit load or capital gains tax. A ₹3-lakh personal loan over 2 years at 11% interest could work out better and you'd still keep your investment running as planned.
What should you check before you apply?
If you're leaning toward taking a loan, then make sure you know what you're getting into:
Banks typically look at your credit score, monthly income, existing EMIs and job stability. If your CIBIL score is above 750 then your chances are stronger. Being salaried with a regular income makes it easier too. Some lenders also factor in your relationship history with them. Kotak Mahindra Bank offers pre-approved personal loans for eligible customers which means you can access funds instantly without submitting multiple documents.
Quick tip: If you overborrow or delay payments then it can impact your credit score. Also, if your cash flow is already tight, adding a loan could stretch it thin. Make sure you’re factoring in your existing commitments before you decide.
The personal loan interest rate plays a big role in deciding whether it’s worth going for. Rates can range between 10.99% to 30% depending on your profile. Also check for processing fees, prepayment penalties and hidden charges. A loan with zero foreclosure charges gives you more flexibility if you plan to repay earlier.
Don’t just look at your monthly amount but also see if it fits easily in your budget. Use a personal loan EMI calculator to know what you’re signing up for. A slightly higher EMI over a shorter tenure might save you more on interest than a lower EMI over a longer one.
Choosing the right path forward
Here’s the simplest way to decide:
What’s also helpful is the flexibility many banks now offer. Kotak Mahindra Bank provides quick approvals and transparent processing, so you’re not stuck waiting when the need is urgent. You can check your eligibility online in minutes and know exactly where you stand.
Breaking a long-term investment should always be a last resort. If there’s a smarter way to handle the situation then it’s worth considering. And while every situation is unique, having options makes all the difference. Kotak Mahindra Bank offers personal loans designed for speed and simplicity especially for customers who need support without delay. At the end of the day, choosing the right approach comes down to what helps you meet today’s needs while continuing to build tomorrow’s security.
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