Why should you take out a personal loan?
Everyone can find good reasons to take a personal loan, but keep in mind that no matter the situation, it must be paid back finally.
By Guy Avtalyon
The personal loan is borrowed money but what are good reasons to take a loan? Where are you gonna spend that money? Would you like to make some large purchases, ease financial difficulties, or to remodel your home?
You have to pay back this loan in monthly portions typically for the next two to six years. Yes, typically, but it might require more time to pay back it all. It depends on your financial situation and how careful you are with that financial obligation.
Maybe it may look silly to take out a personal loan for, for instance, personal reasons, but it can be very useful in some cases. Of course, when used and paid back on time.
Good reasons to take a loan are numerous, but it isn’t a solution for every financial situation. Usually, people take out a loan to solve improper money management.
One of the good reasons to take a loan can be if you have credit card debt with high-interest rates. That can be a difficult and very serious problem. The more interest you owe, your payments will be higher, and you’ll need more time to be debt-free.
The variety of good reasons to take a loan
As we said, if you have credit card debt and the interest rate is high it is smart to take a loan, of course, if you are qualified, so you could pay off your debt faster since the personal loan is with a lower interest rate. Hence, you’ll spend less money on that obligation. For example, a bad reason to take out a loan is to invest in the stock market. If you want to do that it is smarter to save and then invest.
If you think that good reasons to take a loan can be your vacation or wedding, we are so sorry but you couldn’t be more wrong.
To consolidate debt it is a smart decision
Actually, it is one of the most common good reasons to take a loan. For example, if you have various loans or credit cards and they all have different interest rates and balances. It might look like open doors to the trouble. To cover them all or a bigger part of them could be one of the good reasons to take a loan.
When you take a loan and if you use it for debt consolidation, you’ll connect all of those balances into just one monthly payment. By this, the connecting of all debts will make it easier to pay off and you’ll avoid getting overwhelmed.
A personal loan is at lower interest rates which will reduce the amount of interest you pay and the time to pay off your debt. Consolidation allows you to pay off credit cards with a clear end and shorter time frame.
If you need money for moving expenses
That is one of the good reasons to take a loan if you have to relocate over a long-distance move. Costs could be very expensive on such an occasion. Yes, expensive enough to take a loan.
A loan can help you move your furniture or other household things. But also, it can help you to buy new furniture for your new home, to pay for the service to transfer your car to another country or something similar. But before even asking for a loan, think will your income be able to cover the pay off your loan balance. This estimation will help you bypass the added burden of paying off your loan when starting a new life in a new place.
When you have to remodel your home
Home remodeling is also one of the good reasons to take a loan. Doesn’t matter if you need a new roof, solar panels, a new kitchen, or a swimming pool, it is smarter to take a loan for that to finish. Especially if you don’t have ownership of your home or you want to avoid a mortgage on the home you own.
When taking a loan for home remodeling there is no limitation on what you’ll spend the fund on. You can spend on landscaping or hardscaping, hot tub, new windows, paint the whole house, install the new heat infrastructure. There are no limitations. A personal loan is great to help in such situations when you don’t have the cash on hand right now but you’re in need.
Instead of a payday loan
If you’re suffering financial difficulties, you may be motivated to take out a payday loan. Be careful, payday loans are expensive and can put you in much worse situations than you were before. Therefore, a personal loan is a better solution.
Payday loans are easy to get, but they have big risks. For example, interest rates are enormously high, some lenders will charge you more than 500% in APR.
Most US states have usury regulations, for instance, that limit the lenders to charge the interest of over 35%. But, payday lenders are allowed to charge their high-interest rates. Regulations on this kind of loan are controlled by the states and some states even forbid any kind of payday loans.
For example, in California, a payday lender is allowed to charge a 14-day APR of 459% for a loan of $100. Fees on these loans are also high, they can range up to almost $18 per each $100 of loan. So, the better choice is to take a personal loan instead of this costly one.
Good reasons to take a loan are unplanned emergency expenses
For example, to finance funeral expenses. This isn’t a pleasant issue and the majority of people avoid discussing it. The truth is that funeral expenses can be very costly. If your family doesn’t already own you’ll have to buy a burial plot, to pay funeral home services, a coffin, and you’ll have to pay some other things which, in total, may cost you up to thousands of dollars. Remember, death is costly besides it is a sad event.
A loan can be a crucial source to cover all costs when a family member dies. In such a situation everyone needs money quickly and if the deceased person’s savings cannot cover the expenses of the funeral some family members have the opportunity to apply for a personal loan, also such it is the ethical obligation to cover the deceased’s last costs.
Paying medical bills is another reason to take a personal loan. The loan can be used for corrective surgery, dental intervention, fertility treatments, etc. Each of them can cost over $5.000. Added costs can be medications, aftercare, or medical travel expenses. All of them are possible, and sometimes necessary, to finance by a loan.
Good reasons to take a loan: you need to make a large purchases
Household accidents can come suddenly. If you quickly need to buy a new fridge, dryer, washer, the new computer for a job but don’t have the money on hand, a personal loan is the first aid.
Of course, there are so many expensive things you would like to have in your home such as entertainment things. However, it isn’t a smart decision to take a loan to buy them. Take a loan only for the things you really need for a normal life. Use it to buy the new oven, to remodel and equip the bathroom, for something that is undoubtedly necessary. For example, electronics! You’ll need months of savings to be able to buy them. Instead of waiting, you can take a personal loan and purchase them immediately.
Also, if you don’t have tens of thousands of dollars at disposal, you’ll take a loan to buy a new car, recreational vehicle, or boat, for example.
Who are lenders?
Online lenders are set to make borrowing as easy as possible. They will tell you immediately all about your approval, if your application is approved or not, how much you can borrow, and many other things. This kind of lender will offer lower interest rates and lower fees if they have any. Also, your approval chances are better with online lenders especially if your credit score isn’t great.
Don’t worry, in most cases online loans are unsecured. That means you don’t need the collateral to get approved. That makes them safer. If you miss paying the loan, your credit score will fall, but your washer will stay at your home and you won’t suffer foreclosure.
