Does the purpose of a Personal Loan matter?

When the purpose of a thing is not defined, abuse is inevitable. When seeking a loan, it is pertinent to note that one is just as bad as a debt away if there is no aim to its request, and more importantly a laid-out plan to pay it back. 

Most times when applying for a loan from a bank or credit union, people are asked a couple of questions like profession, net pay, next of kin, the purpose of seeking the loan, among other things. It is believed that there is a germane motive to one applying for a loan, and the reason should be stated in the log, but then again, does the purpose of a personal loan matter? 

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In the current age of advancement where the world has seen different phases of hardship after the recession, and the COVID outbreak changed the pattern of business that rippled to every individual. while some have had it unfair, others have smiled to the bank to place more deposits. For those on the other side of the deposit who visit the bank for a loan request, the bank provides fields for their log which the eager loan seeker joyfully completes. 

In all sincerity, the bank cares about the purpose of a loan, as it helps them consider their options. Remember the bank is a finance house intended for business and therefore has to consider its options in mitigating its risk. It also helps to ascertain your capacity, and how much they can give out, how long they spread the loan, among other things. 

Similar to the above question, the purpose of a loan should matter more important to the seeker than the bank. In all, the bank is an establishment for purposes like this, hence the bank is glad that you come to seek a loan, after all, that is why they are in business, while they feed on interest and some extra charges. 

The purpose of seeking a loan for an individual is influenced by a couple of reasons like business expansion, bulk purchase of items, debt repayment, funds constraint/delay, unforeseen situations from life, the list is simply endless, however, it is the responsibility of the loan seeker to be true to his/herself than assuming a lifestyle creep on loan. 

Just because personal loans are not secured like the case of mortgage loans, the loan may be used for a different motive entirely. Personal loans, unlike house mortgages and vehicle loans, are rarely backed by collateral, hence the loan is not as closely monitored as other types of loans. 

When you apply for a personal loan, the lender only checks your credit history, and ratings, as well as your cash flow, to see if you can afford the instalments. Depending on the lender, the money might be accessible to you in minutes or days if you're authorized. Other than these, the banks do not monitor what you spend your loan on, unless in maybe some extreme cases. 

It's advisable to ensure that you're not breaking any loan terms; if you use a loan for banned activities, the lender may force you to repay the full amount plus interest right away. 

If we are to call a spade a spade, a loan is still a form of debt whether good or bad, it is therefore vital that you ensure that whatever motive was spurred to your decision on the loan is genuine and there is a plan towards its payback with little or no constraint on your cashflow.

Seeking a personal loan could come out of unforeseen instances, however, do not get carried away because you consider the bank does not know or need to know about the sole purpose of the loan that you now abuse. Abusing your loan payment depletes your credit rating and importantly puts you in a more financial mess. It pays to be accountable to your bank, but more importantly, it pays to be accountable to yourself. 

Overall, the purpose of a personal loan matter most to you, the loan seeker.