The festive season is always special, filled with activities like decorating your home, shopping for gifts, and visiting relatives. While there's excitement everywhere, expenses also increase. Sometimes, these expenses become so high that they begin to overwhelm your monthly income. This often leads people to consider taking out a personal loan or credit card.

If you're going beyond your budget this Diwali and considering a loan, it's crucial to understand a few important things. While loans can be helpful, if not used wisely, they can become a significant financial liability.

Take a loan only when necessary.
Sometimes, we take out loans just to enhance the festive season, such as buying expensive gifts, new clothes, or planning vacations. But you should ask yourself whether these expenses are truly necessary. If these expenses can be reduced or postponed, it's better to avoid taking out a loan.

Is there an alternative to a credit card?
If you have a credit card and can make payments within 30-45 days, it may be a better option than a loan. Many credit card companies also offer festive offers and cashback. Keep in mind that timely payments are essential; otherwise, you may incur high interest.

Borrow only as much as necessary.
When taking out a personal loan, people often borrow more than they need to have a little extra, but this extra money can prove costly later in the form of higher interest. Therefore, borrow only as much as necessary and plan to repay it as quickly as possible.

Keep the loan term short.
The purpose of taking a personal loan is to meet immediate needs. Therefore, keep the term as short as possible, between 6 months and 1 year. Paying EMIs for a long period not only disrupts your monthly budget but also dampens the joy of the festival.

Don't let larger financial goals suffer.
Suppose you're planning to take out a loan for a car, a home, or your children's education in the next few months, taking out a personal loan during this festive season could impact your credit score and loan eligibility. Therefore, make a wise decision so that today's small pleasures don't outweigh tomorrow's big needs.

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