Personal loans can be a great option in a variety of circumstances. Many borrowers prefer personal loans since they are unsecured (meaning they require no collateral), have a competitive rate of interest, and a long enough repayment term. That said, given that it can have a lasting impact on your credit score and financial standing, it’s important to only take a personal loan for the right reasons. Here are some reasons why you may want to get a personal loan.
- Consolidating credit card debts: If you have multiple credit cards with outstanding balances, making payments toward each card may become difficult and really hard to track. In this case, you could get a personal loan to consolidate all your debts into a single monthly payment. What’s more, it’s likely you’ll be able to secure a lower rate on your personal loan, which will help you save money on interest as well.
- Refinancing your student loan: Refinancing from a high-interest student loan to a low-interest personal loan may give you some financial relief. But, keep in mind that student loans have tax advantages, which you will be missing out on if you refinance to a personal loan.
- Financing a large purchase: Personal loans can also come in handy if you need to make a large purchase. Before you take out a personal loan for this purpose, consider whether the purchase is a need or a want. If it is something you really need, then you can take a personal loan and repay the loan amount on a monthly basis. However, avoid taking personal loans for vanity purchases that you don’t really require.
- Renovating your home: Renovating your home is usually a big expense. If you don’t want to take out a home equity loan, you could get the required funds by way of a personal loan.
- Pay for emergency expenses: If you have to pay for emergency expenses, like healthcare bills that are not covered by your insurance plan or expensive car repairs, you may want to consider getting a personal loan.
Although personal loans are extremely useful under the right circumstances, you may have other financial options to consider as well. So, make sure to consult a financial advisor before you go ahead with applying for a personal loan.
