Are you looking to borrow money but aren’t sure about your options? We can help. Reading this guide will help you decide if a personal loan is right for your needs.
Below are the top 9 best reasons for personal loan financing. Do these reasons apply to your situation? Read on to find out.
1. You Need Money Right Now
The one thing you can predict in life is that life is unpredictable. All of us have unexpected expenses pop up at least once a month.
Most of the time, we keep a little extra in our account to cover these, just in case. But sometimes, it’s not enough.
Sometimes, we’re hit suddenly with repair bills, fees, or penalties we just can’t pay right now. And unfortunately, “right now” is when payment is due.
When you have a big, unplanned for expenses that just can’t wait, personal loans are a good option. Why? They’re fast.
With many personal lenders, you can have cash in your account in as little as one business day!
That’s right, “cash.” That’s the other good part.
Credit, checks, and other payment types aren’t accepted in all situations. But cash is good for any expense.
2. No One Else Will Lend to You
Banks and other lenders usually have very high lending standards. Their biggest concern is almost always your credit score. If you have a low credit score, most banks won’t even consider lending to you.
And while bad credit means instant denial, that’s not all banks look at. Even if you have good credit, you might be denied due to a short employment history or other factors.
Personal loans are much easier to get approved for. It’s very common for people with bad credit to be approved for a personal loan.
3. Establish Good Credit
And what if you have no credit history at all? That’s another common reason to be turned down by the bank. And it’s another great reason to apply for a personal loan.
They’re an easy, fast way to start building a good credit history, even if you keep the money in your account and don’t spend it on anything. If you simply borrow the money and make payments on time until it’s paid off, it shows that you’re a good borrower. Then you’ll have a good credit score for future endeavors.
It will cost you a little in interest, but it’s worth it. It’s less interest than you’d pay on a credit card balance.
And the amount you can borrow with a personal loan is higher than the tiny credit line you’d be approved for with no credit history. Borrowing larger amounts has a bigger impact on your credit score.
4. Lower Interest Rates
Most credit cards have a low introductory interest rate. But when this rate ends, the interest rate and minimum monthly payment increase tremendously. It may up your monthly expenses beyond what you can pay.
Even if you can pay it, if you’re only able to pay the minimum amount, most of your monthly payment is interest. Very little of it actually goes toward paying down the debt.
Using a low-interest personal loan to pay off high-interest credit card debt could save you thousands of dollars. For one thing, you’ll pay up to hundreds less in interest each month.
And by lowering the interest, you may be able to pay it off faster, saving you even more. You should also be able to lower the monthly payment to an amount you can comfortably pay.
This same trick works on any high-interest debt. Refinancing your student loans, for example, gives you the potential to renegotiate your monthly payment and lower the interest rate.
Also, you can avoid high-interest credit card debt altogether by not getting a credit card in the first place. Instead, get a personal loan for your borrowing needs with a fixed, low-interest rate and predictable monthly payment.
5. Consolidate Debt
This may well be the most common reason of all to get a personal loan. As you just saw, high-interest debt can easily become too much to handle. Aside from the issues you just read about, having multiple high-interest debts causes even more trouble.
When you have several debts to different creditors, you’re more likely to miss a payment. That can result in late fees, higher interest, and bad credit.
Personal loans can help. By paying all your debts with one personal loan, you only have one monthly debt payment to keep track of.
And, as already stated, you should also be able to lower that monthly payment to a more feasible amount. Plus, if the interest rate of the loan is less than the combined interest you were paying, you’ll pay thousands less in interest over the life of the debt.
6. Catch Up on Other Bills
Unexpected expenses, like those mentioned above, can cause another problem: getting behind on your bills. When you’re already struggling to pay the bills, they often get compounded with late fees and penalty rates.
This makes it near impossible to catch back up. And then you’re stuck paying these higher rates month-after-month.
If this is where you’re at right now, a personal loan can help. You can use even a small loan to pay off the bills and all the late fees, and even get one or two months ahead. This gets your bills back to their normal, lower rate.
The money you save in late fees should outweigh the amount of interest on the loan. You can use the money you saved to pay the loan back. Then, your bills are back to normal.
7. You Need Money for an Investment
This might be the best reason to get a personal loan: borrowing money to make money. You can use your loan to fund a well-planned money-making investment, like starting your own business.
We DO NOT advise you to risk it on the stock market or other such gambles. But if you’re skilled at refurbishing, for example, you could use the loan to pay for used items, such as furniture, equipment, or cars, plus the cost to fix them up. Then refurbish and sell them for a profit.
You can also use it for investments that save money. You could solarize your home. Or buy a more energy-efficient water heater or HVAC system.
These home improvements can drastically cut your monthly expenses. And they up the value of your home.
8. Finance a Wedding, Funeral, or Other Big Event
Events like weddings mean a bunch of big expenses to a bunch of different people. A personal loan allows you to combine all these expenses into one simple monthly payment.
A death in the family is made even worse by the thousands of dollars you now owe in sudden funeral expenses. If insurance doesn’t cover it, and there isn’t another feasible payment plan available, a personal loan can make things easier.
9. Pay for Moving Costs
Speaking of big, expensive events, how about moving day? Moving can also be an unexpected, sudden expense. If you get evicted or foreclosed, for example, you need to move right away.
A personal loan gives you all you need to have professional movers box and ship your items. It even pays for secondary moving expenses, such as repairs on a vacated rental property or new appliances for your next address.
The Top 9 Reasons for Personal Loan Financing
Do the situations above seem all too familiar to you? If any of these reasons for personal loan financing apply to you, consider taking out a personal loan now.
Now, check out Financial Juggling: 10 Ways Multiple Cash Loans Can Help You Find Your Balance.