11 Practical Reasons to Take Out a Loan

11 Practical Reasons to Take Out a Loan

Did you know that one in four adults in the United States finds it hard to pay for their bills since the pandemic outbreak?

If you’re suffering financially, consider getting a personal loan. Loans get a good amount of cash that can aid you in paying for events, such as honeymoons, traveling, or medical expenses. Personal loans aren’t that cheap, but they’re better than other loans when it comes to interest plus they’re great for emergencies.

Not convinced? Then, read on to learn about 11 practical reasons that may help you determine whether you should take out a loan.

What are Personal Loans?

Secured loans need borrowers to provide collateral. For auto loans, the vehicle will serve as the collateral when you’re unable to repay the loan.

Borrowers under secured loans must use the money only for the specified purpose. If you’ve acquired a mortgage loan, for example, you must only use the money to buy a house.

Meanwhile, unsecured loans don’t need borrowers to provide collateral. This means that creditors have nothing to seize in case you aren’t able to repay the loan. However, you’ll face certain consequences, such as your loan going into default.

A personal loan is a type of unsecured loan. Unlike secured loans, borrowers can spend the money in any way they want. Of course, so long as it follows their signed loan agreement.

How Do Personal Loans Work?

As with any other loan, credit history and credit score helps determine whether you qualify for a personal loan. Those that don’t meet the requirements have the option of using collateral such as a savings account. Asking a family or a friend to co-sign the personal loan can also work.

After getting the approval for your loan request, the lender will award the fund to you. The time it takes depends on the amount of money you borrowed, but it often takes 24 hours to a few days.

Lenders often give at least 30 days leeway before you have to start repaying the money. Fortunately, personal loans have fixed interest rates, so you’ll be paying for the same amount per month.

Reasons to Take Out a Loan

From consolidating debts to financing milestone life changes, countless reasons can justify taking out a loan. Here are a few reasons:

1. To Consolidate a Debt

Do you have a lot of credit card debts weighing on your shoulders? Are your interest rates piling up beyond what your income can handle? If so, taking out a loan would be ideal for you.

You can apply for a personal debt consolidation loan and use the money to pay off all your credit card debts. This will simplify and merge all your debts into one. Instead of paying for different monthly installments with varying interest rates, you’ll only have to worry about paying one monthly installment.

What’s great about this type of loan is that it has low interest rates. The average credit card interest ranges around 16.6 percent, while personal loan interests can go as low as four percent. Thus, taking out personal debt consolidation loans can help you save money.

2. You’re Renovating Your Home

Whether you’re renovating your kitchen or adding a pool, you’ll accumulate a high renovation bill. While you can take out a home equity loan to finance home renovations, they’re quite risky.

Home equity loans are a type of secured loan which means you’ll need collateral. In most cases, your home will become collateral which means you can lose your home when you fail to repay the money.

For homeowners who can’t afford to risk their homes in case they fall behind payments, get a personal loan. It’s also faster to process and get personal loans compared to home equity loans.

3. Paying For New Appliances

Do you need a new freezer or refrigerator but don’t have the funds to pay for it? Getting a loan can solve your problem.

As mentioned earlier, personal loans can cover almost anything, including home appliances. Instead of waiting for months, a personal loan allows you to make a purchase as soon as you can. This can help you save money in the long run as you get to avoid paying for short-term expenses.

For instance, your washer and drier broke. As an alternative, you’ll have to pay to use laundromats. In the long run, your short-term expenses pile up to a large amount which you could have used for other matters.

4. You’re Getting Married

The average wedding cost starts from $22,500. This is bound to rise depending on the wedding theme. With economic status today, it’s likely that most couples don’t have such an amount of cash at hand.

Suppose you’re thinking of relying on your credit card to pay off wedding expenses, don’t. This is impractical as credit cards charge high interest rates and are often limited. It’s far cheaper to get a personal loan if you need extra cash to cover unprecedented wedding expenses.

5. Pay For Moving Costs

If you decided to move, prepare to pay for moving expenses. Short-distance relocation can cost you around $1,250. However, if you’re planning to move out of state, your moving expenses can go for as high as $4,890.

Don’t have enough funds at hand? Personal loans can help cover the expenses you’ll incur from moving to your new place. You can also use a personal loan to pay for your rent for the first three months.

6. Vehicle financing

The problem with an auto loan is that banks tend to be strict in filtering qualified applicants. Aside from this, most lenders need applicants to offer collateral. In case you’re unable to repay your loans, they’ll seize your automobile.

One alternative to buying your dream automobile is to seek a personal loan. It frees you from the need to present collateral, allowing you to buy a vehicle of your choice as soon as possible.

7. When You Can’t Ask Help From Family and Relatives

While you can always ask for a loan from your family, relatives, or friends, it takes more than guts. For one, not everyone has reliable families to turn to. Even if you have one, the social pressure from getting a loan from a family member is hard.

A loan from relatives, however, comes with the possibility of making relationships awkward. This is especially true if your relatives tend to blabber about everything.

If you can’t pay off your debt, they may embarrass you when they talk about it to other people. They may also get annoyed with you, which can change the way they act toward you. In these cases, it’s more attractive to take out personal loans from lending companies.

8. Personal Loans are Better than Payday Loans

Payday loans are short-term loans with high interest rates. While it can be tempting to take out payday loans during emergencies, it’s very risky.

Aside from high interest rates, payday loans usually have two to four weeks of repayment time. The short repayment period makes it hard for borrowers to gather the money on time. This forces borrowers to renew the loan and gives lenders the chance to increase the interest by 400 percent.

Meanwhile, personal loans are cheaper and safer, with the maximum interest rate being 36 percent. It also has a longer repayment period which reduces the pressure from borrowers.

9. Finance Funeral Expenses

Funeral services such as embalming, transportation, and caskets are expensive. Costs can reach up to thousands of dollars which can be heavy on the part of the living relatives. One piece of financial advice we can give is to get a personal loan to cover the expenses.

10. Medical Bills

Another unexpected event that can accumulate to tens of thousands of dollars includes medical emergencies. Depending on the type of treatment you get, expect to face at least a few thousand medical bills. If you don’t have health insurance to cover your bills, consider applying for a personal loan.

11. Opening or Expanding Business

Equipment and wages are among the fees you need to factor in when opening a new business. Depending on the type of business, you may have to spend tens to hundreds of thousands of dollars.

This is also true when you’re looking to open a new branch locally or on international grounds. If you still lack funds amidst having investors, consider a personal loan from Plenti.

Experience a personal loan like no other in as simple as a tap, swipe, click. Enjoy the benefits of interest rates tailored according to your needs. Here’s more, no need to wait long as you can receive your funds as early as 24 hours following the approval.

Relieve Financial Stress with Personal Loans

Economic recession across the world is forcing people to take out a loan to meet financial needs. Avoid risky loan terms such as short repayment periods and high rates by opting for personal loans. Personal loans are one of the best financial solutions that you can take advantage of and designed as a quick and cheap save.

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Published at Fri, 10 Sep 2021 07:06:46 -0400