Your landlord is pounding on the door. Rent is due and you don’t have the money.
Is it time for a personal loan? You need to decide before you get evicted.
This guide was created to help. Keep reading to learn reasons for a personal loan.
Good Reasons for a Personal Loan
When an emergency strikes and you need money fast, a personal loan can get you out of your bind.
There are many, many good reasons to get a loan, despite the risk. Here are a few of the situations where it makes sense to consider a personal loan.
1. Car Expenses
Cars are incredibly expensive, but millions of Americans live in areas with unreliable public transportation. They have no choice but to rely on cars.
Loans are often involved in every step of the ownership process. Most Americans take on debt when they buy vehicles. After the car belongs to you, you still have to deal with maintenance costs.
The times when you’re most likely to need a loan are when you’re making the original purchase and when you’re confronted with unexpected repairs. Losing your car could have an impact on your job if you depend on it for transportation.
That’s why it makes sense to get a personal loan to take care of your car. It’s not fun, but it is a part of adult life.
2. Big Move
Life is never settled. You may think you’re stuck in a city only to discover that you suddenly have to move. This could be for work or for personal reasons.
If you’re lucky, your new job will offer an adequate relocation package. If you’re not, you’ll have to scrape together the funds yourself. A personal loan can help you out.
You’re in a good position for taking on debt because you’re hopefully moving for better opportunities. That means that you should be able to repay your loan once you’re settled. Be careful not to ask for more than you need.
3. School Expenses
Having a college degree can completely alter your career prospects. Education debt is very sensible if it’s planned correctly. A personal loan can help you cover tuition or living costs.
If you decide to choose this route, document everything. It’s very easy to start mixing your money and using loan funds to pay for things like movie tickets. Thinking of your school loan as “free money” is a trap.
You’ll have to repay every dollar that you borrow unless you file for bankruptcy. Federal school loans are not wiped out by bankruptcy. A personal loan, however, is.
Going to school is difficult but worth it for many people.
4. Home Repair
Your home is your castle. When something goes wrong, you have to fix it immediately or your own comfort is at risk.
Your safety may be at stake as well, depending on the repair. Gas leaks, for instance, need to be attended to the moment you notice a problem. There’s no time for a delay.
If a pipe bursts and floods your living room, that needs to be handled quickly as well. Homeowner’s or renter’s insurance might help. If not, you may need to take out a personal loan.
Your home is such a valuable investment that you can even consider taking out loans to cover projects like renovating the kitchen or bathroom. You’ll be able to recoup your money later when you sell the property. In the meantime, you’ll have the comfort of living in a better-equipped house.
Unexpected home repairs are a very common reason for people to seek a loan. Homeowner’s insurance is very specific about what it covers. Many Americans skip getting insurance altogether.
5. Medical Emergency
Millions of Americans are plagued by medical debt. A recent study found that one in six Americans has medical debt on their credit report. That amounts to more than $81 billion.
However, your health can’t be ignored. If your doctor recommends a treatment plan that will make you healthier or more comfortable, you need to try to comply with it. This is true even if your insurance won’t cover the entire bill.
Covering your medical needs is so important that it makes sense to take out a personal loan to help out. The extra money can make a huge difference in your quality of life.
Once you realize that you’re going to need help paying for your care, secure your loan immediately. When you’re sick and stressed out, you don’t want to worry about paying your providers.
You may also need to take out a loan to cover the medical expenses of a beloved family member or pet. If your child needs something, for instance, you’ll be willing to move heaven and earth to make sure they receive the treatment.
Your pets care can be very expensive depending on what they require.
Bad Reasons for a Personal Loan
Don’t fall victim to these bad reasons for getting a personal loan if you want secure finances. It’s better to broke and debt-free than have a mountain of debt but some cash in your pocket.
If the following situations describe you, it’s time to reevaluate your plans.
1. You’re Trying to Show Off
Wanting to impress people is a primal human desire. Yet, the desire can lead you astray. If you find yourself thinking about taking out a personal loan just to show off, reconsider.
Flaunting your wealth doesn’t make sense if you don’t actually have any money. You’re not a bad person for wanting to show off a little, but you should do it in a way that naturally fits into your lifestyle.
You might be able to find an unscrupulous lender who will loan you money whether you can afford it not. Avoid these people and situations like the plague!
People who really care about you will understand if you’re experiencing difficulties. They won’t expect you to keep up with the Joneses.
2. You Want to Have Fun
Obtaining a personal loan and blowing all the money partying is a spectacularly bad idea. There’s no end to the amount of damage that you can do. After all, there’s always going to be a new party that you want to go to or a new restaurant that you’ll be dying to try.
A personal loan should be looked at as an emergency measure to be used in the last resort. If you’re too broke to have the kind of social life that you want, it’s a good idea to rework your finances. Perhaps it’s time to talk to your boss about a raise.
But feeling bored or like you’re being left out is no excuse for going into debt. There are plenty of free activities that you can engage your mind with. Books and board games are often so inexpensive that they’re nearly free.
3. You’re Buying Electronics
A new TV, a dazzling new tablet. New gadgets and gizmos are released every month. There’s a lot of pressure to fit in by buying the latest name brand gear.
It’s not smart to go into debt to buy gear that you don’t need. If you don’t have the cash to pay for your new TV, you probably can’t afford it.
There’s no shame in buying used and scouring flea markets and garage sales. A life without debt frees you from a mountain of anxiety and stress.
4. You’re Borrowing for a Friend
It’s tough to see your friend in a difficult spot. Of course, you want to help out as much as you can. But that doesn’t mean that you should yourself liable for someone else’s mistakes.
Going into debt to help out a friend is a bad idea unless the situation is really severe. For example, you might be willing to stretch yourself to pay for medical or funeral expenses.
In general, however, you should avoid these situations. It puts you in a terrible position financially and if your friend is unable to pay you back, you’ll probably start to resent them.
5. You Have No Way to Repay
Sometimes your finances look bleak. You desperately need money but you have no way to get it. You might be tempted to get a personal loan.
This plan only works if you can repay the loan. If you can’t, you’re only making things more difficult for yourself. The debt spiral is nearly impossible to escape.
Neglecting to pay your debt can damage more than just your credit score. If you borrow money from a friend and never pay it back, your friendship will be affected.
Whatever your reasons for a personal loan, the decision needs to be carefully considered. Debt is hard to erase.
If you decide to go ahead with the loan, make sure you have a strong repayment strategy in place. You’re trying to make your finances stronger not more complicated.
Read our blog to increase your financial knowledge. We can help you with everything from determining the best loan type for your situation to how to negotiate with your lender.