If you fall on hard times or need a financial boost, personal loans can have some significant benefits. For one, you can use a personal loan for virtually any expense. It could be used on a want or a need. Financial planners have even suggested that there are a few instances where these types of loans can actually be advantageous.
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The main consideration is the interest rate of the loan and whether you can pay back the loan in a timely fashion. Here are a few situations where personal loans may be more helpful than harmful:
Credit card consolidation
Do you have creditors and collection departments contacting you at every turn? Do you want to significantly lower your interest payments and start chipping away at the principal on your credit card balances? A personal loan can help you lump all of your credit cards into one easy to manage payment. You can pay off your creditors using the loan, and then pay your personal loan provider instead. This is one instance where the interest rate on the personal loan truly matters, so find the lowest interest rate available to you.
Finance a big purchase
Do you need new appliances? Do you want to make a large investment? The big question here is, do you ‘need’ or ‘want’ this new purchase. If it is truly a necessity, then getting a personal loan is an easy option to finance your next move. However, if you are able to save up the money over a couple of months, then you may not need a loan. It’s best to avoid impulse purchases, take a step back, and better assess the situation before making any financial commitments.
Wedding costs
You want to plan the wedding of your dreams, but you are worried about the bottom-line impact on your finances. Personal loans are better for these types of expenses. You can save a considerable amount rather than charging all of the expenses to a credit card. The best way to plan for this type of loan is to create a comprehensive budget for your wedding and then apply for a loan based on additional funds that you need.
Additional credit
If you are just starting to establish your credit, a small personal loan can actually help you build your credit while avoiding exorbitant interest rates. In addition, different types of credit can strengthen your FICO score.
In many ways, personal loans are better than credit cards because the interest rates and repayment options are easier to handle for the borrower. You don’t need to apply for a huge personal loan with a high-interest rate either. If you are shopping for a large purchase and need additional funds, you can find many online lenders who will loan you money without attaching high fees and ridiculous interest rates.
