The Pros And Cons Of Taking A Personal Loan
Financial experts will always tell you that clearing off your debts should always be top priority if you are aiming for financial stability. But sometimes, we lose our grasp on a situation, forcing us to avail a personal loan instead. It is no secret that this type of loan comes with a huge interest rate that can spell disaster for your savings plan. If you do not have any idea when you should be taking a loan and when you must not, here are some advantages and disadvantages of availing a personal loan that you should take into account before taking the plunge.
Here are the pros for you to consider:
To Pay Off Debts
As explained before, most people take a personal loan so that they can pay off some other loan which probably has a higher interest rate. It also comes in handy especially when there is a huge outstanding balance from other loans like a credit card loan or a payday loan. Just make sure that whichever loan you are trying to repay has a higher interest rate than your personal loan.
To Resolve A Medical Crisis
A medical emergency cannot wait and neither does it arrive with a date. Hence, a personal loan to resolve a medical crisis will be good if you don’t have enough savings. A surgery or treatment often requires a huge amount of money and a personal loan is probably one of the only options you have to tide you over the medical bills. It doesn’t take much time to get transferred to your account as well.
To Allocate For Moving Expenses
Moving to another city or abroad and getting settled there can often incur a lot of costs. Renting or buying a new house, setting it up to make it homey, bearing the mover’s cost, buying new appliances – all these come with a hefty price tag. Taking a personal loan might solve the problem momentarily. Though don’t forget that you might have to bear the cost over the next few years.
To Use When Redecorating Your House
Sometimes, our houses need renovation and redecorating. Since it all needs to be done in one go, you can’t really pay the price in installments, and this is where personal loans come into the picture. Painting the rooms, upgrading electrical appliances, or making your home more ecological are some of the reasons people start renovating their houses. Whatever the reason may be, the loan can be the answer to your financial woes.
To Repair A Car
If your car is old, has been in an accident, or just needs some upgrading, it can turn into a costly affair. There are some major repairs that your insurance company might not cover, so be prepared to lose all your savings. Paying for the repairs can be easy if you take out a personal loan.
While these are just some situations as to when you can take a personal loan, here are other examples where a personal loan can spell disaster.
To Use For A Business Venture
When you are starting your own business, taking out a personal loan is a bad idea as there are tons of better ways to get a different loan. Finding a co-investor, opting for small business loans, or getting funded by angel investors – these are some of the best options most entrepreneurs opt for.
To Use In Stock Trading
Stock trading is not bad, per se, but it is a risky business especially if you aren’t experienced in that field. Chances are, you might lose everything if the companies where you invested in go bankrupt.
To Engage in Illegal Affairs
If you are planning to do things that are not legal and your lender finds that out, you are likely to be in big trouble. So tread the world carefully, and steer clear of anything that has an illegal tag attached to it.
To Avail It For Someone Else
If you are availing it for someone else, you must understand the repercussions in case your friend does not pay the money back to you. You will be the defaulter, and it will have negative effects on your credit report.
As you can see, before taking a personal loan, you need to be sure that this is the best option and the loan is absolutely necessary; if not, try other ways to fix your problem.
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