Deciding whether to borrow money when you find yourself in an unenviable situation can be tricky. Although you have several options at your disposal, such as borrowing from friends or relatives, taking a cash advance from your pension fund, or applying for a loan, the last option seems to be the most common choice.
Borrowing from lending providers is easier than when you do it from people you know. Lenders view these transactions as business, whereas that’s not the case with people you know. Also, failing to repay a debt to lenders won’t harm them since they’ll find a way to get their money back. But borrowing from friends and relatives is a sensitive topic because not paying back the money can seriously harm your relationships.
You never know when you might need money, so don’t discard this option. The offer is vast, and if you look at this nettside, you can surely find something that’ll suit you. If you use loans for valid reasons and behave responsibly, these financial arrangements can significantly improve your credit score and overall financial situation.
For instance, you’ve been paying off a student loan since college, have two credit cards, plus there’s a cash advance you took out for day-to-day expenses. Given so many obligations, it takes a lot of planning and good organization to stay on top of all payments and deadlines. If you miss a payment or settle it after the deadline, that won’t be good for your finances.
Consolidation of all monthly payments into one is the main reason for taking out a personal loan. It can help you budget your obligations and minimize the risk of default. Of course, it’s easier to remember one payment date than several.
Also, paying one interest instead of several can ease this financial burden. Moreover, by consolidating your debts, you can get rid of old and high-interest debts. This new debt may come with a slightly extended repayment period, but if taken on favorable terms, you’ll pay it off without any problems.
Pay for Education
Personal loans can be a good way to improve certain aspects of your life, provided you have no bad marks in your credit history. And you can use this money for good if you decide to pay college, professional development, or profession change for you or someone from your family.
For instance, you could use personal loans to pay for learning materials, different online or offline courses, and everything related to studying (even staying in a campus). Of course, only on the condition when lenders approve such deals, as not all lending providers will borrow money for education.
Meanwhile, paying for your kids’ tuition with a personal loan is not a wise move. Instead, they can try to get financial assistance for education from the government or private lenders. These allowances are a more favorable option and have less strict eligibility criteria since even people with no credit history can apply.
Renovate Your House
It’s about time to revamp your living space, but you lack the money to make that happen soon. Renovating your home is a smart move, as it’ll further increase the selling value of your property. In fact, it’s an excellent investment with a high return if you decide to sell your home.
If you lack money for home renovation or upgrades, personal loans are your thing. Unlike home equity loans, they’re safer for the borrower because they don’t require collateral. But they allow you to take out amounts that may not be enough for some larger projects (a maximum of 40 or 50 thousand, depending on the lender).
Still, for minor or mid-size renovations or upgrades, such as interior painting, drywall setting, or new windows installation, this money will be enough.
Medical Emergencies and Interventions
Good health insurance is half the battle. It means you’re sure to get the best possible medical service, but still, there are costs you’ll have to pay on top of that. Depending on the needs, these out-of-pocket expenses can be high. Not to mention that they can pop up when you least expect them or when you don’t have enough money to cover them.
In that case, personal loans help you cover both unplanned and planned medical expenses. Whether it’s a sudden intervention or something you have already scheduled, this financing method will take a significant burden off your budget. So you can help yourself or your loved ones who need medical help.
You can use the borrowed money for almost all medical treatments not included in your insurance. For instance, you can pay for various surgeries, dental procedures, fertility treatments, and even various cosmetic procedures.
If you don’t know if medical financing is a good thing for you, find out through lenders if you qualify for these loans. This preapproval won’t affect your credit score, but it can be useful when deciding whether to borrow money.
Planned or Unexpected Personal Events
You’ll experience some beautiful things and want to mark and remember those occasions for the rest of your life. Some of them are expected and planned, and others will be sudden. Both events will require certain costs, and the good thing is that there are ways to bear these expenses with ease.
Personal loans can be of great help for financing these events. Amounts of several to several tens of thousands of dollars are handy for organizing weddings, birthdays, engagements, anniversaries, and even baby showers. You can even use that money to buy wedding rings or go on a honeymoon.
With this money, you can have a party to remember, but with no headache due to the high costs. In fact, personal loans can be very favorable, especially if you’re a borrower with a good credit score. And who knows, maybe you come across a favorable deal, such as ‘locking’ the interest (fixed installment over the loan lifetime) or loans with no early exit fees (no costs if you repay the debt earlier).
When Not to Take Out a Personal Loan
Besides the valid reasons for borrowing, it’s good to know that taking out a personal loan is not always a good idea. To start with, you should never take on debt if your financial situation is difficult, that is, if you’re already over-indebted. Then, the additional liability is not in your favor unless you have a good debt consolidation plan.
You shouldn’t take personal loans for investing or starting a new business. Every investment carries a risk, meaning you can lose the borrowed money in a blink of an eye. And if that happens, you still have a debt to repay, plus interest. Besides, loan costs could be higher than investment return, so you’re at a loss.
Starting a Business
If you wonder why taking out a personal loan for starting a business is a bad idea, that’s because you’re taking it in your name, not in the name of your company. It means your behavior towards this debt is reflected in your credit score, not your business’ credit. For example, if you pay your debt on time, you improve your credit score. But if you’re negligent, lenders will sue you to collect their debt.
Paying for Living Expenses
Personal loans shouldn’t serve to cover day-to-day expenses and bills like utilities. Simply, these financial deals can cost you too much if you use them only to overcome current difficulties. Instead, do your best to get your finances in order without unnecessary debt.
Although loans can meet everyone’s needs, they’re not for everyone. Quite simply, there are valid reasons for borrowing money, and there are also those when that’s not a good idea. So, think carefully about how necessary the loan is for you and how it will affect your finances before signing anything.