With so many advantages, should you look at a personal loan only when you are cash-strapped, or use it for spending on a marriage, children’s education or holiday trip? (as advertised by most banks). Personal loans are not only for the above mentioned purposes. Here we suggest some ways through which you can efficiently make use of a personal loan and actually earn or save money.

Take a personal loan and save tax: Most of the investments for tax savings are typically made at the end of the year, at one go. This is when a personal loan will come in handy, if you haven’t saved the money to invest upto the maximum permissible limit for saving tax.

For example, consider the case where an individual takes a personal loan of Rs.60,000 and invests in a tax saving investment such as National Saving Certificate (interest payable is 9.5% p.a.).

The tax savings under Sec 88 of the IT Act is Rs.12,000 and the interest income from NSC, for the 30-month period works out to Rs.15,400 (approx). This works out to a total of Rs.27, 400.

On the other hand the interest payment on the personal loan at an interest of 21%, over a 30-month period, works out to Rs.16,300 (approx.).

Therefore you stand to gain Rs. 11,100.

Repay your credit card debt: Very often a personal loan works out cheaper than borrowing on a credit card. The interest charged on a credit card ranges from a minimum of 27.6% p.a. 36% p.a., depending on the type of card. This is much higher compared to the interest charged on a personal loan.

Hence it makes financial sense to take a personal loan and repay any outstanding credit card dues.

Invest in stock market: Many analysts feel that this is the right time to invest in the stock market, as most of the blue-chip stocks are at their rock-bottom prices. The returns over the next 2-3 years from the stock markets could well cross the 25% mark. If you are for taking the risk and want to use the opportunity to build your portfolio, but have no funds, you can avail of a personal loan. The loan can be repaid over the next 2-3 years and the interest that you pay on the loan would be more than compensated by the returns on your investment.