A Personal Loan Could Be A Huge Help To You In These 5 Situations
A personal loan is a financial tool, not a cure-all to your financial problems
Personal loans tend to have lower interest rates than credit cards, but they should still be used carefully.
It may be tempting to borrow money for that holiday to Europe you've always dreamed of, or buying a big purchase that you simply don't have the cash for, but these are expenses that are better left delayed until you can save enough on your own.
1. To consolidate your existing debt so you pay less interest overall
For people who have one or more credit cards that are charged to the max, a personal loan could be a good way to consolidate the charges into one monthly payment. Take note that this only makes sense if the personal loan has a lower interest rate than your credit card!
For example, if the interest rate for your credit card is 15%, you could get a personal loan with a fixed interest rate of 10% and save that 5%.
2. To kickstart your own business
Getting a business loan can be challenging if you're just starting out, in which case, it's a good idea to look into personal loans. The benefits are that the process of getting a personal loan tends to be faster with fewer requirements, allowing you to access cash quickly. This makes personal loans ideal for start-ups.
In order to go this route, you should make sure that you have a stellar personal credit record and must be confident that you commit to monthly repayments.
3. To further your education for both personal and professional growth
If you're looking to further your education, you shouldn't allow a lack of funds to stop you. Not only could you be increasing your potential earnings with a formal education to back up your experience, going back to school is also a great way to grow as an individual.
Many personal loan offer flexible repayments, are affordable, and perhaps most importantly, give you the freedom to spend it on any course you want. Of course, this works best for working students as you can pay off the loan while you study.
4. To pay for a major once-in-a-lifetime expense such as home renovation
While it's always best to save up for expected large expenses such as an upcoming home renovation, sometimes it can just be really difficult to set aside enough cash every month to get that grand total.
You don't want to start life in your new home in debt, so if you're considering taking a personal loan to cover renovations, make sure that the monthly repayments are less than 15% of your current income. And once you receive that loan, be sure to budget what you want and need accordingly. Don't spend more money on top of the loan!
At the end of the day, the purpose of a personal loan is to give yourself a better, more comfortable life. Overspending and being unable to pay back your debt is the complete opposite of that. But having your dream home and an affordable way to pay for it monthly is the way to go. :)
5. When there is an unavoidable personal emergency
If you don't have a large emergency fund that you can fall back on in times of trouble, then it may be a good idea to look into a personal loan to help you. Unavoidable emergencies are situations that are unforseen, such as replacing essential items during a natural disaster, necessary house repair, or family medical issues.
In cases like this, a personal loan can truly be a lifesaver. Just make sure to read the terms closely and don't commit yourself unless you are sure you can follow through on payments.
Personal loans are attractive because they tend to have lower interest rates than credit cards, are an easy way to fund a big expense, and tend to have less requirements to be approved
Whatever you need the money for, the most important thing is to ensure you have the means to pay it back efficiently. Ok?