Personal loans are a type of credit. They often carry less interest than that of a credit card, if your credit score is good. However, they shouldn’t be taken out lightly, like to buy an expensive purse or go on vacation. In what scenarios are personal loans appropriate to apply for?
Housing
If you’re looking to improve the value of your home, a personal loan is your best bet. As opposed to a home equity loan, you won’t have to pledge your house as an asset. It will also help you to avoid wracking up lots of credit card debt. Once you choose to sell, you may end up making more money than you spent. There are many companies, like Simple Path Financial, that will tell you if you are eligible after a simple consultation.
Credit Cards
Maxed out credit cards often have a high interest rate, so if you are paying off multiple cards it may benefit you to use a personal loan. That way you will only be making one payment per month at a much lower interest rate. This can save you money as well as helping to simplify your financials. You may want to reach out to a professional accountant to consult on your specific situation, as debt can be tricky to navigate.
Emergency Expenses
When you don’t have an emergency fund, unexpected expenses like car repair can seem debilitating. People often turn to payday loans, but these are risky and often have a very high interest rate. Personal loans will be cheaper in the long run, especially if your credit rating is high. You will be able to continue on with your life with a little help from a loan.
A personal loan is a type of unsecured debt, so there is no collateral. It’s typically less risky than a payday loan and can carry a low interest for those with good credit. It’s a good resource to keep in your back pocket for large, unexpected expenses and home improvement projects.
