Often times, when we run into emergency situations, our first instinct is to figure out how to get the money if it is important and especially urgent.
Experts from Friend Lender says “Once in a while, we all need a bit of extra cash. Your credit card rate may be sky-rocketing, you may have important purchases to make or emergency renovations to be done on your dream house”. Whatever the reason is, if we cannot conveniently afford it from our savings, one of the next best options would be to take a loan.
However, before taking a loan, it is important to know how these loans work.
What is a Personal Loan?
A personal loan is simply the money you borrow from a lender, with a plan to pay back in fixed monthly payments. This is usually from banks, credit unions or online lenders. Personal loans are often preferred by many people due to fixed interest rates, fixed terms, and fixed payments.
Benefits of Applying for a Personal Loan
When compared to other forms of loans, taking a personal loan has its own benefits and here are only a few of them:
- Potential for a higher borrowing limit than a credit card
- Potential for lower interest rate than a credit card
- There is a predictable repayment schedule
- You will likely have a longer repayment plan than some other options
- You do not need a collateral
- Easier to manage
Top Reasons to Apply for a Personal Loan
While there may be lots of reasons to apply for a loan that you may consider valid, here are some top reasons that could make taking personal loans come in handy:
1. To refinance existing debts
Consolidate debts is a very common and effective practice, as it helps people to combine multiple debts into one monthly payment. This helps them have lower monthly payments while easily managing all the debts within a timeframe, to avoid being overwhelmed.
2. To pay off credit cards
Paying off credit cards with personal loans could help you with lower interest rates, which also helps reduce the time you use in paying off the debt
3. To cover unexpected major expenses
Unexpected expenses such as medical bills, funeral, emergency repairs in the house and vehicle repairs could be overwhelming, as no one prepares you for them or how hard they affect your finances. Most online lenders would send the money within 24 hours of the request, which would help you take care of these expenses depending on how urgent they are.
4. Making a large purchase
Perhaps you need to buy a car or buy home equipment that you believe cannot wait any longer, personal loans could come to the rescue. You can then pay up in the following month while enjoying your purchase.
Conclusion
While you take out loans to cover emergency and necessary expenses, always bear in mind that you will have to pay them back with interests. So, you may want to think twice before applying for a personal loan.