How do personal loans impact my other financial goals?

Personal loans can have a notable effect on your other financial goals, both positively and negatively, depending on how you manage the loan and your overall financial planning. When you take out a personal loan, you commit to fixed monthly EMIs, which become a regular part of your household expenses. This fixed obligation minimises your disposable income potentially limiting the amount you can allocate towards savings, investments, or other important goals such as retirement, children’s education, or purchasing a home.

Different ways a personal loan can impact your financial goals:

• Reduced Savings Potential: With a portion of your income directed towards loan repayment you may find it challenging to maintain or grow your savings and investment portfolio. This can delay your progress towards long-term objectives.
• Cash Flow Constraints: High EMIs can strain your monthly budget, making it harder to manage unexpected expenses or emergencies.
• Eligibility for Future Loans: Lenders judge your existing debt obligations when you apply for new credit. High outstanding personal loan balances can affect your eligibility for future loans, such as home or car loans, as they impact your debt-to-income ratio.
• Interest Rate Fluctuations: In a rising interest rate environment, as seen in 2025, higher EMIs can further squeeze your finances, making it more difficult to balance loan repayments with other goals.
• Debt Consolidation Benefits: On the positive front using a personal loan to combine high interest debts can simplify your finances and potentially free up cash for other priorities if managed well.