Reasons for a Personal Loan: When You Should and Shouldn’t Get One
It’s not unusual to be in a situation where you need more money than you have. Now more than ever, American families are living tightly within their means. Many are living paycheck to paycheck.
That means when it’s time to make a big purchase — to start a business, buy a house, or pay for medical care — it can be overwhelming to think about the costs involved. Luckily, there always ways to find and borrow money when you need it the most.
Personal loans can be borrowed from a variety of money lenders and for a variety of reasons. But what are good reasons for personal loans? Are there instances where you should stay away from such borrowing?
Read on and we’ll walk you through everything you need to know.
Reasons For Personal Loans
In many instances, borrowing some extra cash can prove to be hugely advantageous. After all, as long as you’re responsible for your payments and have a solid credit score, you can borrow and return the money with little detriment to your personal situation.
Even if your credit score isn’t stellar, there are lenders who provide personal loans bad credit that may be perfect for you.
What are good reasons to get a personal loan? Here are a few.
Consolidate Your Existing Debt
Sometimes when we borrow money, we fall behind on our schedules. Who hasn’t missed a credit card payment or two at some point? But quickly, these debts can begin to add up and overwhelm us.
Debts to credit card companies can come with significant interest, meaning that their total amount can grow exponentially over time. That’s why it is often advantageous to pay off such debts in one single swoop, eliminating the growth that might occur if you take things slow.
Obtaining a personal loan is a great way to knock out debt payments with one full amount. You can save a lot of money this way by getting your debts paid and preventing interest from building your total up.
Now, this is only advantageous if the interest rate on your loan is much better than that of the other debts you owe. If it’s not, then you’ve just put yourself in the same situation with a different lender. But if there is a loan with a more appealing interest rate, using the loan to consolidate your debts can save you serious money.
Working On A Home Improvement Project
Everyone knows that a home is a huge investment.
Many lucky families live in their homes for many years, as the value rises and the potential profit from sales increases. Home improvement projects, such as screening in a back porch or re-doing a bathroom, can also help to add value (and enjoyment!) to your home.
These projects are often well worth the money put into them because they yield greater profits when you’re eventually ready to sell the home. A new bathtub might be a great gift to yourself after a long day, but it’s a genuinely smart investment as well.
For this reason, taking out a personal loan to finance a home improvement project can be a great idea. These projects can be fairly expensive, especially based on the scope of work you want to accomplish. But the rewards are well worth borrowing some money if you need to.
Pulling Off A Large Event
A few instances in a lifetime, you’ll probably be called upon to host a huge event. It might be a wedding, a funeral, a bat mitzvah, or something similar in size and scope.
These events can be, as we probably don’t have to remind you, hugely expensive. If you put all the associated costs of these events on your credit card, you might find yourself owing a huge amount of interest in the coming months and years.
Personal loans tend to have much better interest rates. Therefore, taking a personal loan out to help fund a wedding or a funeral can be a very intelligent idea.
Reasons Not To Get A Personal Loan
Personal loans can be hugely helpful, but they aren’t always a good idea. There are some situations where it might be best to avoid borrowing money from a lender.
Paying For Medical Expenses
Everyone struggles to pay off medical bills. In fact, medical bills are one of the main reasons American families end up filing for bankruptcy. Despite this, it’s still not a great idea to look to personal loans to help pay for such medical bills.
Why? You’re much likely to find better help elsewhere. While personal loans are often more advantageous than credit cards, they still pale in comparison to many medical assistance programs.
You should always check with your hospital or medical supervisor about what sort of payment plans they offer.
A Night On The Town
This should go without saying, but it’s worth repeating just in case: a personal loan is not free money.
Obtaining and spending borrowed money on frivolous life activities is only likely to put you further into debt. If you are going to take a personal loan out, make sure you’re doing it for a worthwhile reason.
Understanding Personal Loans
There are many reasons for personal loan borrowing. If you’re in a tight financial situation and need a little help, a personal loan can be hugely beneficial. The above guide should help you understand when and when not to look for that extra boost of help.
Need more financial advice? Check out our other financial posts on this site for more.