Not Sure if You Should Get a Personal Loan? Here Are 5 Instances When Personal Loans Are a Good Idea

You might want to consider a personal loan if you need to borrow for a relatively short and specific period of time. Personal loans can run from one year to five years. For example, if you have a lump sum of money coming to you in two years but you do not have enough cash at present, a two-year personal loan can be a way to cover your needs.

A secured personal loan will require you to present collateral or financial assets you own, such as a home or a car. These high-value properties can be utilized to pay the lender if you default on your loan. Collateral serves as a hedge for lenders to ensure that borrowers will repay the loan on time. 

  1. Consolidate credit card debt

If you owe a considerable balance on several credit cards with high-interest rates, taking out a personal loan to pay them off can save you money. For example, suppose the average interest rate on the credit card is 9.49%, and the average rate on the personal loan is 9.41%. In that case, the difference should allow you to pay the entire balance faster with lower interest rates in total. Moreover, it is easier to track and pay off a single debt instead of multiple ones. 

  1. Pay off high-interest debts

A personal loan may seem more expensive than other types of loans. But it isn’t the most expensive. For example, payday loans have far higher interest rates than personal loans from banks. Likewise, if you have an old personal loan with a steep interest rate, replacing it with a new loan can save you some money. But prior to switching to a new loan, make sure to determine whether there is a prepayment penalty on the old loan as well as application fees on the new one. In some cases, those fees can be substantial.

  1. You are financing a home or a big purchase

If you purchase new appliances, install new structures to your home, or make a significant purchase, opting for a Secured Personal Loan can be less costly than financing via the seller or billing everything on your credit card. But if you have a home equity loan, this could be less expensive. But bear in mind that these are secured debts, so you are putting your home on the line.

  1. Paying for a major life event

Major life events like big-ticket purchases can be less expensive if you pay for them via a personal loan instead of a credit card. According to a 2021 Investopedia survey, one in 5 US couples utilizes loans or investments to pay for the wedding. But as necessary as these events are, you might want to consider being more conservative rather than going into debt for the long term. For that same reason, getting a loan to fund a vacation may not be a good idea unless you consider it the trip of a lifetime.

  1. Improve your credit score

Taking out a personal loan and paying it on time can uplift your credit score, especially if you have had a history of missed payments and incurred other debts. If your credit card report mostly shows credit card debt, incorporating a personal loan might help with the mix. Having various types of loans and showing how responsibly you handle them is considered a plus for your credit score.

Explore more

9 Key Features to Look for When Buying a Mitsubishi SUV...

Looking for a Mitsubishi SUV for sale? You're in the right place! This handy guide will walk you through the top 9 features to...

Everything You Need To Know About Water Leak Detection Services

Key Takeaways: Water leak detection is crucial for homeowners as it helps identify potential issues before they cause serious damage. Ignoring water leaks can lead to...
Financial Management

Revolutionize Your Financial Management with Zintego Invoice Template and Receipt Maker

Introduction Efficient financial management is the lifeblood of any successful business. In today's fast-paced world, where digital solutions reign supreme, managing finances manually can be...
Canvas Prints and Photo

aAPersonalize Your Home Decor with Custom Canvas Prints and Photo Tiles

Your home is a reflection of your personality and style, and the way you decorate its walls can play a significant role in creating...
IT Certification

Mastering IT Certification: The Value of Practice Tests and the Risks...

Introduction In the world of information technology (IT), certifications serve as a testament to an individual's knowledge and skills, providing a pathway to career advancement...

What to Do if You’re Involved in a Single Vehicle Accident

Navigating through the aftermath of a single vehicle accident can be a daunting experience. It's one of those things you'd probably rather not think...

Maximizing Your Retirement Savings: 3 Tips to Prepare for the 2024...

Are you ready to supercharge your retirement savings? As we look ahead to 2024, it's time to get savvy about the impending changes to...
Evolution in Gaming

The Tech Evolution in Gaming: A Journey Through Innovation

The evolution of technology in the gaming industry is a captivating tale of innovation, creativity, and revolutionary breakthroughs. From the primitive pixelated games of...