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When Is Taking a Personal Loan A Good Idea?

Team Jar
December 26, 2022
When Is Taking a Personal Loan A Good Idea?

A personal loan can be a good idea when you have no other option. It is always advisable to have an alternate plan in place before applying for one.

Are you thinking about taking a personal loan? Worried about Medical Expenses, Debt Consolidation, House Renovation, Vehicle Repair, Child's Education, Wedding, and so on?

Have a look at what are the good ideas or reasons for taking a personal loan. You can simply meet your financial needs by opting for a personal loan online. Low-interest personal loans have no boundaries. You don't need to provide any security for a personal loan. Get an instant personal loan for several uses.

 

Top 10 Good Ideas For Taking a Personal Loan

 

1. For Home Improvements and Big Purchases

Personal loans are better than home loans. How? It's a good way to finance home improvements without putting up collateral. The term is short, so you don't carry the responsibility for long.

 

Taking out a personal loan could be cheaper than financing through the vendor or using a credit card. A home equity loan or line of credit could be cheaper if you have home equity. Both debts are secured, meaning you'll risk your home.

 

2. For High-Interest Loan Repayment

If you have an existing loan that has a higher interest rate, acquiring a personal loan to repay it is an excellent decision. If you have a credit card loan outstanding with an interest rate of 24-36% each month, acquiring a personal loan with an interest rate in the range of 10-18% will be a wise thing to do.

This way, you can lower your interest dramatically.

 

3. To Deal With a Medical Emergency

During a medical emergency, you need money urgently, and a personal loan might come to your rescue as the loan processing is fast and the documentation required is less. You may perform the comparison online in a few minutes , and avail of the loan at the lowest interest rates.

Some financial institutions even provide instantaneous loan disbursements to their preexisting clients. A personal loan could be used to cover medical costs if you or a loved one suddenly require emergency surgery due to a serious disease.

While a personal loan can help in an immediate financial crisis, it is far more prudent to invest in a family health insurance policy.

 

4. For a Decision to Pursue Higher Education

Getting a personal loan is smart if you want to go to college, either in India or overseas. The money borrowed can be used for anything, including living expenses, car repairs, or further schooling.

 

5. For Raising Your Credit Score

Your credit rating will be a major factor in the interest rate you pay on any loans you may need in the future.

To improve your credit score quickly, take out a small personal loan and repay it on time or ahead of schedule. In this method, the lender can see that you have a solid credit history, increasing your future borrowing capacity.

6. To Get Married

Weddings cost money - Most weddings are incredibly expensive. We don't mind the cost of a wedding because it's a one-time event (for most).

Indians spend a lot on weddings, therefore, many get personal loans to cover the costs. A personal loan can give a quick and straightforward way to ensure everything goes smoothly during a wedding, so the focus is on the pair. Banks offer personal loans based on a borrower's income, up to Rs. 25 lakhs in some situations.

7. For Going on Vacation

Want to escape grueling work hours and city life but can't afford a vacation? A personal loan can fund your ideal vacation. If you have decent credit, you can acquire a loan and repay it through EMIs.

 

8. For Repaying High-Interest Debts

Personal loans are more expensive than certain others, but not the most. Payday loans typically have far higher interest rates than bank loans.

Replacing an older personal loan with a lower interest rate could save you money. Before you do, check if there's a prepayment penalty on the old loan or application or origination fees on the new one. Sometimes, fees are high.

 

 

9. For Repaying Debts

Almost everyone has taken out a loan for a financial emergency. People have several loans, such as home loans, vehicle loans, college loans, etc. Due to the number of loans, it can be difficult to repay them.

A prudent approach would be to take out one personal loan to pay off all outstanding debts, leaving just one. Not only does it decrease the stress of paying interest on various loans, but it also boosts the CIBIL score. Most banks don't reject personal loans to clear the debt.

 

10. For Small Business

Obtaining a company loan requires a lot of work, including evaluating the business concept, its prospects, and its possibilities. There are times when a personal loan for a commercial enterprise makes sense.

If your business is still in the ideation stage and you need funding, a business loan may be tough to get, but a personal loan may be easy to get. If you want a business loan, you may need to submit collateral. In such instances, a personal loan may be best.

 

Taking out a personal loan for a business venture is wise if the sum is not too huge. A business loan is a lot of work and only makes sense for a significant sum. Lastly, unlike personal loans, business loans require a formal business plan that must be authorized by the bank.

 

Summing-Up:

The purpose of this essay is to present a comprehensive study of what are the good ideas or reasons for taking a personal loan. Personal loans should not be taken carelessly.

Borrow and spend wisely. Discipline is a rare trait. The problem isn't the loan; it's the lack of repayment ability. If you can repay personal loans, do so. Make borrowing a last resort, not a habit.

If you spend more than you earn and are in debt, you need better money management, not an "attractive" loan. Make your best and wise choice. But most importantly, pay attention to the points mentioned above.

 

We don't offer financial advice, but we do provide unbiased information and evaluations on trading, investing, and finance. Where we can, we'll help.