Personal loans Aren’t As Shady As You’ve Been Told 

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Many people look at a personal loan as a bad thing. If you have been around such people, you might be wary of taking one. The truth is most people that talk bad about personal loans don’t talk about the bad choices they made and how their choices resulted in their bad experiences.

A personal loan is great for funding an emergency or paying for something you must have when you do not have the cash. Also, it’s a great way of consolidating your debt. 

This guide offers insight into personal loans and why they may not be as bad as you may have heard.

How Do Personal Loans Work?

If you are buying a home, you will want to go for a mortgage. If it’s a car you want to purchase, you go for an auto loan. For the mortgage and auto loan, the property you acquire often acts as collateral. This means that if you do not honor your obligations to service the loan, your home or car will be repossessed by the lender.

On the other hand, personal loans do not require collateral. Often the bank will only need to know that you are capable of repaying the loan. This means that the lender has nothing to repossess if you default. But you may not want to do that because your credit rating will plummet, and you may have difficulty accessing future funding.

A Case for Personal Loans

Debt Consolidation

According to statistics, Americans have a total credit card debt of almost one trillion dollars, and more than 107 million citizens have more than one credit card. Credit card debts may not be the only debts there are today.

Having several debts to pay can be challenging and result in missed payments which could adversely affect your credit score. Credit card debts are more expensive than personal debts. 

So if you have several credit cards and other debts to service, getting a personal loan to pay off your other expensive debts can be a good idea.

It Can Be a Big Saver When Paying For a Major Life Event

Life is made up of small events that you forget within no time. But there are events in life that have great significance and that live in your memory for your entire life. An example of a major event is a wedding. 

Funding a wedding can cost quite a bit, especially if you want to have a big one. In such a situation, taking a loan may be a good idea. However, it would help if you considered not acquiring too much debt for a one-day event because you do not want to spend years paying huge installments.

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It’s Best For Emergencies

Everybody spends their life oblivious of what could happen the next minute. Unfortunately, some events that require money can catch you when least prepared. When they do, you will want a loan that is easy to access. 

Some personal loan lenders take days or even weeks before approving a loan. But in an emergency, you want a lender, such as SoFi, that offers a same day personal loan at a fair rate. 

When You Should Avoid Personal Loans

While personal loans can be helpful in specific circumstances, they may not be as helpful always. So there are situations when you may want to avoid taking one. One such circumstance is if you can afford it. 

The best approach when determining your ability to afford a personal loan is to consider your monthly financial obligations and income. Taking a personal loan is not advisable if you feel like you can’t afford another obligation.

Personal loans can be relatively expensive, so if you have better options, it’s best to use them. For example, a home equity loan can be a better option if you want to make home improvements. If what you need the loan for is not a big necessity, it would be best to avoid the cost altogether. 

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