What Are The Good Reasons to Get A Personal Loan?

Personal Loans - Basics

There are many types of loans out there that we can use. However, one of the most popular types of loans that are taken out on the regular is personal loans. These loans can be used for almost anything - hence their vast popularity.

However, many of us are still confused about when it is wise and unwise to take out a personal loan, and for that reason, we are here to give you all of your personal loan answers.

Realistically, you could take out a personal loan for anything from debt consolidation to booking a vacation. However, there are times when it is a good idea to take out a personal loan, and times when it is not such a good idea to take out a personal loan.

This is why we are here, we want to clearly define what times and reasons are logical for taking out this type of loan.

While you can take out a personal loan for any reason, doing so frivolously can land you in a bit of a sticky spot and make your financial situation worse than it was before.

Remember: Loans are serious and can affect your credit score and financial security, you should not take out a loan just for the sake of it. Always consider if you can afford a loan before you take one out.

Why Get One?

There are plenty of good reasons to take out a loan. Many people will take out personal loans for debt consolidation, repairs, medical care, funerals, weddings, and so on.

However, there are also irresponsible reasons to take out a loan as well, which can include vacations, and buying expensive unnecessary items.

Let’s draw the line as to what things are a good reason to take out a personal loan.

Let’s start in the obvious place.

Debt consolidation

One of the main reasons that people will take out a personal loan is to consolidate their debts.

Some loans can have high interest rates, and if you have multiple loans out, with different interest rates, different pay periods, and different pay dates, it can get a bit overwhelming and confusing.

Consolidating your debts puts all those loans into one bulk payment with one interest rate. It works in a very simple way too.

The personal loan pays off the lender of your loans, and now you only owe the one main loan to the provider of the personal loan, with a set interest rate.

This is fantastic if you have multiple credit card debts as the interest rates for these can get quite high, or if you have credit card debt and installment loans out at the same time, it can consolidate those into one easy payment.

Even though you still owe money, it is much easier to manage and a smoother process.

Emergencies

Another reason many people will take out a loan is for emergencies. This can be anything from medical care to a sudden need for car or home repairs.

In life, we never know when some major expense will hit us, and it is rare we have the amount of money ready to face those payments needed to cover the costs.

Emergencies are unavoidable, and so if you are faced with a sudden and unexpected medical bill, being able to take out a loan that will cover it is a security that you can be thankful for.

Sure you could put it on your credit card, but costs can rack up quickly on a credit card, and you can have higher interest rates if this starts to hurt your credit score.

This is true for any emergencies, it is best to choose personal loans for emergencies rather than by using a credit card. It can help you manage your expenses better and remove stress from the situation.

Okay, maybe not completely, but paying back a personal loan can be much less stressful than managing credit card payments, especially if they equate to a lot, which can be true of emergency payments.

Personal one-offs

Personal one-offs can be anything, it can be for weddings, special anniversaries, or in some cases funerals. None of these things are cheap, and they are part of many traditions. Personal loans provide a ready-made pool of cash to help with deposits for the things you need.

Two of the most expensive things in our lives are love and death, marriage and funerals. While weddings are happy, they can be brought down easily by high costs, and financial worry.

Costs of a funeral can make a sad event even more stressful and horrific. So, having a personal loan ready for these things can make managing all the costs easier and allow you to feel what you need to feel on these emotional occasions.

Renovations/ Remodeling

We would love to say that homes are forever, but they aren’t. Whether you remodel or renovate to sell your home on, or if there have been some issues in your home that you need to correct for health safety, or liveable conditions, it is often required.

Doing this is far from cheap though. Even buying new furnishings can be above and beyond our paychecks and savings, so loans are a good way to go.

If you have to remodel, introduce new walls, wallpaper, doors, or even take down floors and other bases of your home, it can cost thousands of dollars, and most people do not just have this kind of money lying around.

In cases of renovating or remodeling your home, you do not really have much else of a choice.

Personal loans can lend you up to $100,000 or sometimes more depending on your individual situation and the lender, for home remodeling projects a loan like this can be a lifesaver, and while you do still have to repay the loan, it can be much better than living in a house that is falling apart.

These are all very valid and good reasons for taking out a personal loan. Remember the difference between essential and non-essential.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes