When you need some cash to make ends meet, a personal loan can provide you the money you need to get you through the end of the month. Personal loans are borrowed money that can be used for various purposes. These loans are generally paid back within a month or up to a few years, depending on the agreed terms. A personal loan can be extremely helpful, especially in times of emergency and unforeseen circumstances.
It’s important to save up for the future. But sometimes, when circumstances change, you may find yourself in need of emergency cash. If you’re thinking of getting a personal loan, you should know that there are two types:
- Secured Personal Loans: The most common example of this is a home equity loan where your house is used as collateral against the amount you wish to borrow. If you fail to make your monthly repayments, then your lender may repossess your property and sell it to recover the money you owe. Secured loans also allow you to get a higher loan amount.
- Unsecured Personal Loans: These types of loans require no collateral to be pledged against the money you wish to borrow. They are perfect for those who need quick cash but don’t have any valuables or assets to use as loan security. While these don’t have the same risks attached to secured loans, the interest rates are usually higher for unsecured loans. However, some loans offer lower interest rates than others and you can also obtain flexible repayment terms on unsecured loans.
5 Reasons To Get A Personal Loan
Getting a personal loan to cover unexpected situations isn’t always easy especially if you don’t have a good credit score. Fortunately, there are also personal loans for bad credit where you can also explore the possibility of getting share secured loans that will not further affect your credit score.
Now, it is not recommended to get a personal loan if you really don’t need it in the first place. However, it is a good option if you are in need of either of the following:
- Pay For Home Improvements
One of the many reasons to get a personal loan is for home improvements and repairs. These usually require substantial costs, especially if you are looking to replace old appliances or add insulation to your living space. Because many personal loans offer low-interest rates, there is no reason not to take advantage of this option
- Consolidate Multiple Debts
Do you have several existing debts that are making your life miserable? If you’re in a situation in which you need to consolidate debt to eliminate high monthly payments, a personal loan may be ana great option. If you already have a bunch of different creditors and payments are due at almost the same time, consolidating those debts into a single loan can save you a lot of time and hassle.
Sometimes, the only reason someone consolidates their existing bills is to take advantage of lower interest rates. However, it’s important to remember that consolidating your existing debts can cost you money if you still can’t make your payments on time.
- Settle Near-Due Bills
Whether due to inefficient budgeting or sudden loss of income, you may need emergency funding to take care of bills that are due. This is also one of the most common reasons why people would lean on a personal loan. Some need extra money to pay for school fees; others require additional cash to settle medical or hospital bills.
If your rent is almost due and you don’t want to risk losing your home, a personal loan may be a suitable option. However, you should only borrow the amount that you can afford to pay back to avoid getting into a bigger financial mess.
- Finance A Large Purchase
If you want to buy a new car or pay for college tuition fees, a personal loan can get you the money you need. It’s a quick and simple way to get some extra funds to help you finance large purchases that you may not be able to afford at the moment.
- Pocket Money For Vacations
If you’re going on vacation and the airfare and hotel expenses are already covered, then good for you! However, if you’re worried that you don’t have extra cash to cover any contingencies during your trip, a personal loan is a good way to get additional funds—especially if you don’t have a credit card. Just be sure to settle your loan responsibly to avoid any recurring fees or penalties for non-payment.
Personal loans can be used for emergencies, additional financing for large purchases, vacations, and even to celebrate milestones like birthdays or anniversaries. However, keep in mind that a personal loan is a financial obligation.
Therefore, you should still assess your situation carefully whether getting a personal loan is the most viable option. Taking out a personal loan after another personal loan may be an indication of poor financial health. In this case, you’ll need help from a financial counselor to avoid being caught up in an unending cycle of debt.