5 Reasons to Get a Personal Loan

Personal Loan

Personal loans are excellent financing options as they are unsecured, charge lower interest rates, and have manageable payment terms. Read on for five reasons why you should get a personal loan.

1. Debt consolidation

One of the most significant reasons to take out a personal loan is to consolidate your loans. Paying multiple high-interest loans can be overwhelming because the larger part of your income pays the interests instead of the principal. By taking out a personal loan and using the cash to pay off other loans, including payday loans or credit card debt, you combine your loans into a single monthly payment.

Not only is a personal loan easy to manage, but it also charges a lower interest rate, enabling you to save money. According to recent data, the APR for a two-year loan is 9.46%, while credit cards charge 14.75% interest. Consolidating your debts also extends your loans repayments terms, freeing up your income so that you can fund other crucial expenses.

2. Personal loans are excellent alternatives to payday loans

When in need of urgent cash, most people take out payday loans as they are easy to access and take shorter periods to get approved as they do not require a credit check. However, a payday loan has a higher interest rate, often 400% ARPS. It also has a short repayment term, mainly within the next paycheck, so it can be challenging to pay the loan before the deadline. If you fail to clear your payday debt within the set timeframe, the loan is rolled over to the next month, accruing more charges, which increases your repayment burden. 

Consider taking out a personal loan instead of a payday loan, as it also guarantees a fast approval process. They also have a lower interest rate, and some lending companies offer bad credit loans, meaning that you will get financial aid despite a lower credit score.

3. Home improvements

Upgrading your home is an expensive investment. Even when you have set aside money for the remodeling project, the expenses often pile up, necessitating a loan. If you want to avoid the risk of losing your home in case you fall behind on your payments or you simply do not have equity on your property, you could consider getting a personal loan. Personal loans are unsecured, so you do not use your home as collateral.

4. Purchase a car

If you do not have sufficient funds to purchase a car but do not want to compromise on the quality of the vehicle, you could consider getting a low-interest personal loan. Unlike an auto loan, you do not have to worry about your car being repossessed if you default payment when you use a personal loan to finance your purchase.

5. Emergency expenses

If you need cash right away to cater to medical costs, burial expenses, or overdue utility bills, you should consider applying for a personal loan. Most lending companies offer online applications that enable you to determine whether or not your loan will have been approved within minutes. Depending on the lender, you could then receive your loan the same day or within the next few business days, enabling you to cover emergency costs.

Endnote

Consider applying for a personal loan to consolidate your debts, cater to emergency expenses, remodel your home, or finance your car purchase.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.