When life throws us an unexpected curve ball, we might be in a situation where we’re thinking to get a personal loan. A personal loan can be a great option if you need cash to cover large expenses that can’t be covered with your credit card.
Personal loans may be expensive but depending on its use, it might make sense. There are several factors to keep in mind when taking out a personal loan, so it’s important to do your research. Keep a close eye on your total repayment, hidden fees, and flexibility in changing your payment dates.
Five reasons when it’s okay to get a personal loan
1. Debt Consolidation
If you’re drowning in high interest rate credit cards, consolidating your debts when you get a personal loan can help you save thousands of dollars in interest. You’ll have the freedom of having one monthly payment and freeing up the available credit on your accounts.
This in itself should help improve your credit score. Keep in mind that depending on your situation, your interest rate on your personal loan may vary. So always look at the total cost of the loan and compare it to the total interest you would’ve paid on your credit cards.
Take back control of your finances!
Get a FREE checklist for the money moves to make in the New Year.
Also get new articles, advice, and tips delivered right in your email inbox with our newsletter!
2. Educational Courses or Classes
If you’re looking to advance your career, you may be looking at outside courses to help your career development. These classes aren’t cheap. If you’re investing in yourself to advance in your field, a personal loan can get you the funds you need.
Again, always make sure you’re shopping for the best rates possible and make sure you can afford the monthly payments. To check out the lowest available personal loan rates, you can check out LendingTree or ReadyForZero.
3. Home Improvement Projects or Home Repair
If you’re looking to tackle a home improvement project such as renovating your kitchen or bathroom, a personal loan might make sense. First, consider the total cost of the project and evaluate the potential appreciation.
Look for the lowest possible price on supplies and contractors. You might also be thinking that a HELOC would make more sense. Banks have tightened up their lending requirements and you’ll need substantial equity in your home.
4. Emergency Auto Repair
If your job requires you to commute to work by car and you have an unexpected break down, a personal loan can help you get the quick funds you need. Luckily, most auto repair costs are under $3,000, so the loan amount you take out should be manageable to pay back.
You should only take out a loan for the amount you’ll need to cover the cost. If you’re approved for a higher amount, it might be tempting to take out as much as you can. Don’t forget that this is the first true test to measure your financial responsibility.
5. Medical Expenses
More than 25% of families in the U.S. experienced financial burdens from medical care. Although your insurance should cover most of the bills, there will be situations where you’re going to be left paying a sizeable chunk.
If you don’t pay the hospital bill, your medical debt will fall into collections. Accounts in collections will hurt your credit score and may prevent you from getting access to credit in the future. You should avoid this at all costs.
Over the past five years, many online lenders such as Lending Club, Sofi, Avant, and Earnest have emerged to give consumers access to credit they once didn’t have. As banks tightened their underwriting guidelines, consumers looking for personal loans now have options. Always make sure you look at all the fine prints such as: origination fees, pre-payment fees, total loan repayment, and flexibility in changing payment dates.
There are many reasons that you might want to get a personal loan. Personal loans may make a good option for you and your family based on your financial situation.
Have you ever thought to get a personal loan? Did you have a positive experience with applying for a personal loan?