Every individual will have a different reason to apply for a personal loan. A few are good for quick application & approvals, while others may not be so. The reasons could be consolidating high-interest credit card debt, huge wedding expenditure, sponsoring leisure trips, etc. We can also include festive events, pending house repairs, or emergency medical expenses.
You can easily use personal loans by borrowing from a bank, local lender, or online P2P lenders without forgoing collateral of value/use. This level of flexibility makes it attractive to prospective customers along with the surety of super quick personal loan approval. It is already clarified that if your credit score is reasonable & the income information matches pre-defined criteria then the loan amount will be immediately transferred to your bank account.
Below are a few recommendations to be made to take a firm decision on taking a personal loan where we have other alternatives ready as well.
When to Consider a Personal Loan
If we think of the potential uses of personal loan, then well be stuck in an everlasting turmoil. You will have to choose your circumstances to seek a personal loan basically.
- Consolidating credit balances– If you already have high credit card balances taken, then you must be paying very high interests which indirectly must be impacting your credit score negatively. Taking a personal loan can help pay off credit cards on time for debt consolidation. This will bring together different costly credit bills & make one payment as a single repayment installment, thereby reducing interest charges & increasing your credit score.
- Emergency costs– If your house is in a dilapidated condition like discolored walls, breaks, etc. then you may not be able to service it with a credit card. Since expensive repairs can dent your credit card balances & eventually the credit score. The same can be applied to medical emergencies. It’s a huge cost that can overtax your credit cards with several related expenses that aren’t covered by your health policy. A personal loan can help manage these hurdles well in advance.
- Personal situations- When you’re stuck in a compelling situation like a wedding, festive celebration, or even difficult times like a funeral, a personal loan can quickly provide a proportional cash amount to make deposits and payment.
- Home improvement- When you intend for a major improvement to the house like kitchen remodeling or extension of the rooms, etc. Here, the good financing options can be categorized into two options of a personal loan and a home equity line of credit. If your creditworthiness is substantial, you’ve been doing well financially to get affordable rates of interest & spending limit. However, with home equity loans you will carry the risk of losing your house if you’re unable to make payments. So, you’re not comfortable keeping your house as a guarantee, then a personal loan could be a great financing option.
When a Personal Loan may Not Be a Good Idea?
A personal loan surely is quite flexible to use, however, there are several purposes which don’t make sense at all:
- To Pay College tuition- A typical education loan can be better suited to pay college tuition fees over personal loans. This is mainly because a personal loan is usually topped with high-interest rates, processing fees, etc. Student loans don’t require the first payment until some months after the borrower has completed the course, while personal loan repayment begins right away.
- Financing a car. Car loan interest rates are typically lower than personal loans because the vehicle serves as collateral security.