With life comes many commitments like mortgages, car loans, and many more. When all these commitments pile up at a point and incur a large financial loss, you might need a bit more than you have to bail you out for the moment. That’s when most people look towards personal loans to settle and resolve these issues. They are great because you can get a big or small loan with different types of repayment schemes. However, just as nothing is perfect, personal loans are not the best option for every scenario. This is why we have come up with this guide to help people understand which situations call for a personal loan.
Debt Consolidation
Debt consolidation is when you compile all the debts you owe and pay them off with a personal loan. This streamlines the debt repayment and makes it easier to record and keep track of payments. With this, you will not get deluged with all the bills. Furthermore, it also helps you save money because of the lowered interest rates of personal loans, although that depends on your credit score. For those with good credit scores, the interest rates on personal loans tend to be lower than those of credit cards, for example.
Alternative to Payday Loans
If you have ever taken a payday loan, you might notice that these loans come with an exorbitant interest rate, some of which can reach up to 391 percent. So, for those of you who are in dire need of emergency funds, instead of taking a loan, a personal loan might work out better as they charge much lower interest rates. Plus, they also have a longer repayment term which means there is no frantic need for you to quickly repay your debts.
Home Renovation
Those of you who have experience with home, renovations would know that it is no cheap feat. It is often very costly in the high thousands. However, there may be times when a home renovation is urgently needed like a busted pipe that soaked all the furniture and structures which would call for an uplift. Some people argue that homeowners can simply apply for home equity loans, but the catch is that one would often have to wage their home as a guarantee for it. In this case, personal loans do not require such collateral which makes for a better option.
Home Relocation
We may not always stay in the same place for the rest of our lives. So, when it comes to moving day, there are many costs to factor in. There are costs like new furniture, home renovation, mover fees, and more. These are large expenditures and most people may not be able to come up with the immediate cash which is why personal loans can be used to cushion the financial impact that one is about to sustain. In this way, you do not have to withstand a big hit to your emergency funds or life savings and you can repay the debt at your own pace.
Emergency Funds
As always, nothing in life is guaranteed, we cannot foresee what the future holds. There are times when undesirable and unexpected things happen that could burn a hole in our wallets. These could be things like a loved one’s funeral or hospitalization. When these kinds of surprises pop in, they usually can cost upwards of thousands which may not be a ready sum that everyone has available. So, personal loans are useful because they are readily available for those who require them.
Major Household Appliances
To go about our daily lives, there are items we need that help to maintain our routines like washing machines, dishwashers, and other daily essential appliances. While taking on a personal loan to purchase these appliances may incur some interest rates, if you do the calculation, you might actually save some money. There are places like laundromats for those who lack the appropriate appliances but going to the laundromat every day may be a costly affair. Especially if you have a big family and laundry tends to accumulate quickly. So, taking on a personal loan to secure essentials could be a wise move.
Vehicle Costs
Getting around is made convenient with vehicles. Yes, there may be public transportation but when it comes to accessibility and convenience, nothing beats owning your own. So, if you are someone who finds that having a car, boat or RV is important to you, personal loans can be taken on to purchase these high ticket items. Again, a personal loan is unsecured as compared to car loans which require you to stake your vehicle as collateral.
Matrimonial Expenses
Weddings are great and enjoyable because they celebrate the union of two individuals. However, what most people do not know is that the costs of planning a wedding are in the high thousands with an average wedding costing about thirty thousand dollars. Unless you have been diligently saving up since your younger days in expectation, many would find it a struggle to fork out such a large sum on such short notice. Even those who have been planning might find it difficult. This is where personal loans come into play which allow you to pay for everything without the fear of accidentally defaulting on any payment.
Honeymoon Costs
After a wedding is one of the most memorable and important affairs, the honeymoon. It is the day where you mark the period of being legally joint together and also celebrate one another. So, most people tend to go big on these events. Just like weddings, not everyone has that ready lump sum of money sitting around. So, when the time calls for it and you really need the cash for a special trip down Niagra Falls, for example, personal loans can help absorb it. Of course, this does not mean you should take this chance to spend beyond your means.
Conclusion
So, while personal loans can help with some money problems, it is not a reason to overspend. Remember to keep within your limits!
