It would be great to have a life wherein you do not have to worry about how to finance your daily or sudden expenses. However, this is not always the reality for most people. Some instances may prompt you to borrow money to compensate for your expenses.
This is exactly where taking out a personal loan can be helpful. But before doing so, you have a couple of important things to consider.
A personal loan is one of the great options if you need cash. A creditor will lend you a certain amount of money that you should pay on a regular basis, along with the interest. And since it does not often entail any collateral, like your car or house to avail it, you need to have a good credit score (and some other factors) for it to be approved.
Read further to learn about some of the situations wherein this type of loan can be a great help for you, and some important considerations before submitting a personal loan application.
Why Get a Personal Loan?
1. To manage two or more existing debts
Handling multiple debts can be difficult because you have to remember the monthly payment, interest rate and due dates of each. When not managed properly, this can lead to missed payments, finance charges and higher interest rates.
If you get a personal loan, you can use the borrowed money to pay off all your creditors, including for your credit cards. This means that you will only have to worry about how to pay back your personal loan. Debt consolidation is indeed the best benefit that this type of loan offers because it will help save you a huge amount of your money and time.
2. To address emergency medical expenses
An emergency typically happens when you least expect it. If you find yourself in need of cash because you or a family member suddenly got hospitalized, for example, a personal loan can prove to be beneficial. The best thing about this solution is that you can choose a payoff structure that suits your monthly budget.
3. To augment travel expenses
The best way to fight exhaustion from your daily work schedule is to take a break from it.
That means going hiking, treating yourself to a spa session or a show at the theatre, or perhaps going on vacation with your loved ones.
Don’t let your finance hinder you from doing these things. You can apply for a personal loan and let the monthly payment remind you of how much you had fun during your trip. This may even inspire you to always do your best at work so you can look forward to your next travel destination in a couple of months.
4. To finance a home renovation project
Your property is one of the investments you should consistently take care of. If it needs to be renovated and you do not want to dip into your savings, a personal loan can be the best solution.
Whether your kitchen needs an upgrade or you want to add a spa or swimming pool outdoors, taking out a personal loan allows you to instantly get the money you need. Remember that you can choose flexible payment tenures of up to four years.
5. To fund big-ticket purchases
If you need to make a major purchase, like a car or some large and costly home appliances, consider getting a personal loan. You can easily get the money you need but pay these back over a long period of time.
Whenever you have to deal with any of these situations, personal loans can be the best solution. But before submitting your application, you should consider three important things.
3 Things to Consider Before Getting a Personal Loan
1. Interest Rate
The interest rate refers to the amount that the lending institution charges aside from the money you borrowed. Depending on the type of loan you chose, you can have a high or low interest rate. An unsecured personal loan (one that does not entail collateral) has higher interest rates than a loan secured with an asset.
Still, there are reputable banks that offer unsecured personal loans with lower interest rates than the others. So make sure to compare all potential creditors before choosing who to work with.
2. Repayment Amount and Flexibility
Repayment amounts are determined by the length of the loan and the interest rate. If you opt for loans with longer time periods, expect to have lower monthly repayments.
Experts also recommended that you choose a personal loan that allows an added lump-sum. This means that you can repay the loan early if you have enough finances. Today, most banks with services catering to personal finance in the UAE, for instance, offer such.
3. Fees and Charges
Aside from the interest rate, you should also know the other fees and charges included in your personal loan. These may include an application fee, servicing fee, insurance, withdrawal fees, early repayment and an early exit. Avoid unnecessary expenses by considering all these fees before choosing the term and type of your loan.
Taking out a personal loan is not a difficult process, especially if you work with the right entity. The lending institution can also help your application run smoothly. But it is imperative that you equip yourself with all the crucial information beforehand so you can be sure to make the right decision.