Personal loans can demystify otherwise expensive financial commitments by a great deal. There is always that thing you want to do but cannot raise enough cash through savings to meet the prohibitive cost at once. Applying for a loan to negotiate for the spread of repayment terms to five years more, becomes a more comfortable option.
A personal loan is the amount of money you can borrow from any lending institution like a bank, online lender, or credit union. In most cases, you may not need to secure such a loan since your monthly salary covers you. Other instances require that you acquire the loan against a property that you may own.
Secured loans may not have issues, but there is a risk of defaulting when it comes to an unsecured loan. A defaulter stands to lose the attached property, which the lending institution can auction to recover the accrued amount.
Read along to understand some scenarios that make sense for application for a personal loan.
Covering Family Emergencies
Some events and occurrences may happen at home when you least expect them. The emergency nature of such issues makes it quite challenging where it calls for the input of finances. Most likely, you may not have a budget, or it could be inadequate. Thus it makes sense to apply for a loan.
Here are some examples of family emergencies that may require financial intervention:
- Death and funeral expenses
- Natural disaster
- Job loss for the breadwinner
Funerals are not something one can plan for since death is unpredictable. As such, it may occur when a family is financially incapable of covering funeral costs. Funeral costs can be expensive, thus making a loan the most viable option.
Earthquakes and floods are a few examples of natural calamities that can sink a family’s financial fortunes. Therefore, it makes sense for a family member to apply for a loan to meet recovery costs.
Paying Medical Expenses
Some medical expenses can be costly, especially where some procedures are outside most insurance providers’ cover. As such, it makes sense to apply for a loan to cover those expenses. Some of these cases can be very expensive, considering that only exceptional experts are willing to offer them.
Here are some examples of medical procedures that may justify a loan application:
- Cosmetic dentist services
- Cosmetic surgery
- Treatment of fertility health issues
Besides paying for the medical procedure, other expenses may have a heavy toll on the patient’s finances. These may include medications, travel expenses, clinic follow-ups, among others.
Credit Card Consolidation
You can take a single loan and use it to pay off the mortgage on your credit card. Doing that leaves you with only the new loan to service provided you commit to avoid using credit cards. You may resume using them after completing payment for the new loan.
While you may get loans from credit unions and lenders, bank loans are the most readily available. Credit unions may offer the best interest rates, making them the most affordable if you can access them. Nevertheless, you can get a secured bank loan for a lower interest rate.
One advantage of taking a loan to consolidate credit cards is the ability to acquire new credit limits. Loading more credit into your cards becomes possible even before you complete paying the new loan.
Refinance Student Loans
It would make much financial sense to refinances student loans with a personal loan. Where you are paying your student loan with variable rates, refinancing can afford you a lower cost. Most likely, since you first applied for the student loan, you have earned a better credit score. An improved credit rating will give you a better chance of getting lower refinancing rates.
The only setback is when your student loan is such a significant amount that a new loan may not cover. You may also have to consider whether you want to lose your tax relief after paying off your student loan.
Financing a Sizable Purchase
Some purchases may not be very urgent but can be essential. You would want to buy them right when you decide it is time to have them. You may not have ready cash at hand to carry out the purchases, and so this makes sense for a loan application.
A good example is covering the expenses of your dream wedding. It would not make much sense to use your credit cards at such occurrences due to the relatively higher interest rates. A loan from a bank or a credit union may afford you lower interests in this case.
There is no dream wedding without a matching honeymoon. A well-thought-out loan will enable you to enjoy your honeymoon or vacation with less pressure.
You can also apply for a loan to purchase state-of-the-art household appliances; this saves you from spending much time trying to accumulate savings. The same case also involves when you want to buy your dream car.
Improve Bad Credit Score
Bad credit scores can be very frustrating to anyone since they lead to the loss of borrowing opportunities. This situation plays out clearly when you have an emergency, and you find it challenging to apply for a quick loan since you do not qualify. Therefore, if applying for a loan can help you consolidate your debts and improve your scores, this makes sense.
Final Verdict | Personal Loans
In the end, the decision to apply for a personal loan depends on you. Consider your repayment ability and establish whether you can give out the monthly repayment amount without feeling a pinch for several years. Should that be the case, then have a clear budget and apply for the loan with confidence. You will find out that you can cover expenses that you could not have had a chance to cover without credit.