When is a personal loan really a good option?

We all have different reasons for taking out loans, whether to fund a big purchase, finance our academic pursuit, clear off debts, or achieve a goal. But with so many options out there – from personal loans to payday loans, credit cards to secured loans, student loans to auto loans, and so much more – it can be difficult for someone to decide on which is best for them.

Personal loan 33m44m55nBut for those of us who have made up our minds on going for personal loans, is this really the best option? If it is, when does it make sense to take out a personal loan instead of the other funding options?

Let’s find out!

Debt consolidation

It makes sense to apply for a personal loan if you have a growing list of debts you’re battling with. Imagine that you’re owing multiple loans or carrying outstanding payments on multiple credit cards with varying interest rates. That’s a recipe for financial trouble. Thankfully, that’s the kind of trouble a personal loan can get you out of.

Once you take out a personal loan to cover the outstanding balances you owe on all your cards, you will be left with just one debt payment to face every month. Not only will this simplify your debt payments, but it will also reduce the net amount of interest you have to pay every month.

Even though some people might say that the interest rates on personal loans can be high, it is still nothing compared with paying multiple interests to different lenders.

So, if you’re looking to reduce the interests on all the debts you owe, while also consolidating them into one, singular debt, personal loans are what you should consider aiming for.

Credit score improvement

Maybe you’ve had a less-than-impressive history with a particular creditor in the past, which warranted that they send some bailiffs after you. Although you later fulfilled your obligations to them, it still didn’t stop them from filing a negative report about you and sending it to the credit bureaus.

You need not worry!

There is a way for you to rebuild your dwindling credit score again. And that way is through the route of personal loans.

When you take a personal loan from a lender and repay it within the stipulated time frame, or before that time, you can boost your credit score as it will improve your credit history and portray you in good lights in front of future lenders.

So if you think you’ll ever have a reason to borrow in the future, but your credit score might hinder you, you might want to start building that score with personal loans today.

Business expansion

Perhaps your business is at that stage where it could use some expansion. Maybe sales have gone up, demands are on a record high, and things are going pretty smoothly, and for the foreseeable future, you don’t see any of these going down the pipe.

Why not take out a personal loan to boost your business, add some new products, move to a bigger base, and achieve that big expansion you’ve always dreamt of?

Another option would be investing in the stock market, you can make educated decisions on what companies to invest on by using tools such as Finscreener.

Since your business is enjoying one of its best times, there is no better time than now to use debt financing to boost things.

However, if your business is on a low and things aren’t really going as you expect, you should avoid personal loans at all costs. Yes, they can help you fix things – at least if financing is one of the challenges you’re facing. But you don’t want to add the stress of debt into what is already a challenging situation. Instead, you should consider other business funding alternatives.

Home remodelling

If you want to spruce your home up, add a little bit of curb appeal, and improve the overall aesthetics of the architecture, personal loans can be your best funding bet. With personal loans, you can get as much money as you need – if your credit score permits – to finance the home remodeling exercise. You can then pay back in small and affordable EMIs instead of spending a considerable amount in one go.

Financial emergencies

For all the talks about planning and preparing for the foreseeable future, financial emergencies are bound to come when we least expect them. Out of the blue, a medical expense might come up. A loved one might die, and funeral expense rears up its ugly head. Or maybe an investment opportunity you never saw coming.

By and large, financial emergencies are a part of our lives. But how can you best handle them when they rear up their heads?

Personal loans! Not only are do these loans come with affordable interest rates, but they’re always available too. Regardless of when your emergency comes up, you’ll always find a personal loan to use to tackle it.

So, if you have a financial emergency that is beyond the grasp of your savings, taking a personal loan – which you can pay back in installments – can be a good option.

Interesting related article: “What is a Personal Loan?”