Why taking a personal loan is a good idea?
Personal loans can be a feasible option in an array of circumstances. Although all unsecure loans are not economical, they can be easy and fast to get compared with other kinds of financing.
So what exactly are personal loans? Some loans are granted for a specific purchase. You buy a house with a home loan, you purchase a car with a car loan and you pay for higher education with a student loan.
However, a personal loan can be used for just almost anything. Some lenders want to know what do you need the money for, but as long as you have borrowed it for a specific and responsible reason, you can use it whatever way you want.Below are the reasons why you should take a personal loan.
One of the most popular uses of a personal loan is to combine other debts, like car loans, credit cards and payday loans, into one loan with a fixed rate, fixed monthly payment and closed-end term.
For instance, if you have one or more credits cards charged to the maximum limit, then you can get a personal loan to consolidate all the charges into one monthly payment. Moreover, the interest rate on the loan could be relatively lower than the annual percentage rates on your credit cards.
Finance a purchase:
Financing a purchase depends on whether it is a want or a need. If you are going to take a loan regardless of it, getting a PL and paying the seller in cash is a better idea than financing through the seller.
However, do not make a decision about financing on the spot. First, ask the seller for a quote and compare it to what you can get through a personal loan. Then decide what the best option for you is.
Pay for a wedding:
Any large event, like a wedding, qualifies for a personal loan if you put all the associated charges on your credit without being able to pay them off in a month.
Taking a personal loan for a huge expense like this might save you a significant amount on interest charges since it has a lower rate compared to your credit card.
Improve your credit:
A personal loan might benefit your credit score in two ways. Firstly, if you credit card report shows credit card debt most of the times, a personal loan can help your ‘account mix’. Often, having different types of loans is favorable to your credit card score.
Secondly, it might lower your credit card utilization ratio which is the amount of total credit you are using compared to your credit limit. The lower the amount of your total credit is, the better you score. Taking a personal loan increases the total amount on your credit card.