The sky is the limit for how someone chooses to use a personal loan. Some financial institutions may inquire as to what individuals intend to do with the funds, while others will simply want to ensure an individual’s ability to repay the secured personal loan.
Personal loans are not cheap, but they can be a viable option in various situations. And, under dire circumstances, one may have to consider it.
But, there’s nothing to worry about! Here are a few situations where a personal loan may become a lifesaver.
Credit Card Debt Consolidation
In Australia, almost 40% of people take out a personal loan to consolidate debt. If a person owes a large balance across one or more high-interest credit cards, obtaining a personal loan to cover them could save money.
The remaining debt can be consolidated or combined into a single payment. The difference in interest rates should allow one to pay off the balance faster and pay less interest overall.
Furthermore, it is easier to track and pay back a single outstanding debt rather than multiple debts.
Paying for Home Renovations
Whether purchasing new appliances or making major home renovations, a personal loan may be less expensive than funding through a seller or using a credit card to make purchases.
In the case of any equity on the home, this is a safe option. A home-equity line of credit or home equity loan may be even more affordable. Nevertheless, since those are both secured debts, it could mean putting the home at risk.
Business loans are often very difficult to secure if moneylenders don’t see potential in a business. Moreover, the applier has to present a detailed business plan that can sometimes not appeal to the moneylender.
Personal loans are pretty flexible in terms of how one chooses to use them. In case an individual needs emergency funds for their business, they can choose to opt for a personal loan instead.
Personal loans also have a lower interest rate than business loans. They can be acquired in a much shorter time and require no detailed expenditure reports.
Enhancing One’s Credit Score
Acquiring a personal loan and repaying it on time can help improve one’s credit score. This can be especially beneficial if an individual has a history of missing payments on other types of debts.
If the credit history primarily shows credit card debt, a personal loan may help the “credit mix.” Having a variety of loans and proving that one can manage them responsibly is positively viewed when assessing one’s credit score.
Financing for Education
Education is an expensive affair today. Therefore, a personal loan for education might be a great idea to cover any expenses related to one’s educational pursuits.
Salaried professionals and students who require additional funding often opt for a personal loan.
A secured personal loan can help cover any extra expenses on top of an education loan. They can also be ideal for short-term courses or professional courses with no education loan provisions.
Whether to pay off a previous loan, renovate a home, business or educational investments, or simply improve one’s credit score, a secured personal loan is a smart way to accomplish any financial requirement.
However, it is always ideal to speak to a professional before making decisions about taking out a personal loan. Even if an individual is sure of their decision, it helps to have a professional guide them in their journey.