A personal loan is neither good nor bad in itself. It is a financial tool that can be very powerful when used well, or very expensive when used poorly. The difference lies in understanding exactly what you are paying, what you are using it for, and whether the benefit you get outweighs the cost of the credit. In Colombia, personal loan rates vary enormously across institutions and according to your profile.
When a bank advertises "loans starting at 1.5% per month," that sounds low. But 1.5% per month equals approximately 19.5% effective annual rate (EAR). On top of that, add the mandatory life insurance and administration fees, which can push the real cost to 24–28% EAR. The key is always to ask for the Total Effective Annual Rate and the Total Credit Cost, not just the nominal rate. By law, institutions must inform you of both.
There are cases where a personal loan is the right decision: 1) To pay off higher-rate credit card debt. If you borrow at 18% to pay a card at 30%, the rate differential saves you money. 2) For an investment that generates a return above the rate. A loan at 20% to start a business that earns you 40% makes financial sense. 3) For a medical or family emergency when you have no other option. 4) For a durable asset that improves your ability to generate income (work tool, transportation).
Borrowing for discretionary consumption — travel, clothing, electronics that will lose value — is almost always a bad idea at these rates. If you need the loan because you consistently spend more than you earn each month, the credit only delays the problem and makes it more expensive. It also does not make sense to take out a loan to "take advantage of a sale" if the cost of credit exceeds the discount obtained.
Always compare: the Effective Annual Rate (EAR), not the nominal. The total term — the longer the term, the more total interest despite lower monthly payments. The life insurance included (some institutions charge it separately). Prepayment penalties (regulated in Colombia but varies). And the Total Credit Cost, which adds everything up. Simulators like the ones on Crenti let you compare these variables in seconds.