Personal loans are some of the most advantageous types of credit for many reasons, not the least of which is their versatility. You can use a personal loan for virtually any purpose you wish. It is important to remember that the money has to be repaid and the onus for using the money in a financially sound manner lies on you as the borrower. It is best to pursue ends that create lasting value or where necessary offset emergencies that cannot wait, otherwise you might find yourself caught in serious debt problems.
In this article, we will look at some needs that create a solid reason to take a personal loan.
To consolidate or repay delinquent debt
Using a personal loan to pay off high interest debt such as credit cards and payday loans is a strategy that is becoming increasingly common. Because the personal loan attracts considerably better terms than these types of credit, you can make significant saving on the total payments. If for example you hold three credit cards at 18% APR, you can take up a personal loan at 12% and pay the outstanding debt on these credit cards. You will then only have to service the personal loan. Aside from the resulting savings, you will improve your credit score by a few points and find it easier to manage a single payment over several small ones.
A home improvement can be quite costly but it presents good value for money since it increases the worth of your house. Taking a personal loan can enable you to finance needed upgrades and you can recoup the amount and more when selling the house. In some scenarios, it might be better to take a home equity loan, but that comes with the risk of losing the house if you default on payment.
Finance education or professional advancement
If you are unable to acquire a student loan to pay for your education expenses and related costs, a personal loan can help offset the shortfall. This option creates value by increasing your job prospects and in turn growing your income. Additionally, if you are bogged down with heavily delinquent student loans that close your avenues for credit, using a personal loan to pay them down may be a worthy option. This will ideally raise your credit rating, thereby opening a line of credit through credit cards and loans that you previously could not access. While pursuing this last option, it is important to remember that the personal loan does not qualify for some of the benefits that student loans carry such as tax deductions, low interest and periodical penalty waivers.
Grow your business
Although there are specialized loans for businesses, a personal loan may make more sense if you have a good credit rating. You may inject the money into the business for a number of purposes such as streamlining production, increasing inventory and expanding premises among others. If the business picks up, you may be able to recoup your investment and pay back your personal loan without having to depend on your main revenue streams.
Although you should always look to Medicaid and health insurance as your first option to cover treatment costs for you or a loved one, a personal loan may offset shortfalls for crucial medical procedures that may be uncovered by these regular avenues. Some lenders even have special low interest personal loans designed to cater to medical emergencies such as surgery, time-critical organ transplants, and intensive care for accidents.
To make important purchases
Sometimes, you might find yourself needing to make critical purchases. For example, you may need a car to commute to a new job or school. If your do not have the capital to make the purchase, a personal loan can help you to make the purchase. When making one-off purchases, it is important that they are warranted and they represent good value for the extra money you will spend on interest and other fees. Items such as expensive clothing, jewelry and electronics will depreciate fairly quickly and this makes them imprudent ways to use your personal loan.
1. https://www.finder.com/should-i-get-a-personal-loan 2. https://www.nerdwallet.com/blog/loans/personal-loan-why-should-i-get/ 3. https://www.investopedia.com/articles/personal-finance/111715/when-are-4. personal-loans-good-idea.asp 5. https://www.valuepenguin.com/personal-loans/should-you-get-personal-loan 6. https://www.thesimpledollar.com/loans/personal/when-you-should-and-shouldnt-use-a-personal-loan/ 7. https://finance.yahoo.com/news/personal-loan-131120785.html