4 Wise Reasons to Apply for a Loan

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Applying for a loan does not mean it’s the end of the world. There are a number of purposes you could use the money for; consolidated debt or personal addition to your house. However, a personal loan differs from, well, a non-personal one. You first need to learn to differentiate between the two.

You can call a personal loan an unsecured one. This means you are not expected to pay any collateral if you cannot pay it back. Your creditor will not seize anything from you should you take an unsecured loan and do not repay. But a personal loan is not all sunshine and rainbows. Should you not repay, your credit score will spiral, and the money you took could default. Secured loans, contrary to personal or unsecured ones, need for you to pay collateral.

Both loans have different features, like your credit score and history will be used to determine if you qualify for a secured loan. Personal loans, on the contrary, can be used for anything, and you don’t need to “qualify” to acquire them. But your creditor will want proof of income and whether you can pay it back.

Loans have benefits, contrary to popular opinion. For example, suppose you are indebted to multiple institutions, like a bank, a credit union, or someone who gave you money to pay back in installments. In that case, you might want to look into the benefits of a debt consolidation loan, as these three options might team up to offer you a simplified way to pay back.

But a loan is not meant for everyone and for everything. Let’s get right into four wise reasons to apply for a loan.

1) When You Need Emergency Cash

Unprecedented is the life we live today. If you need to pay an immediate, upfront cost, or if it is something critical like a surgical procedure, you need emergency money. If you do not have the needed amount, a personal loan for these kinds of emergencies can come in handy. Mostly, it is available through an online form or whatever other medium the creditor you choose prefers. The funding can be yours the same day or a few others later. You need to make a good case for same-day transfer or approval.

Emergency cash can be used in situations like:

• Payment of past-due utilities
• Medical expenses
• Funerals
• Automotive injury or accidents

You might come across “pay-day” loans that have high-interest rates and require you to pay as soon as you receive your next paycheck, hence the term. While these work out for some people, not everyone should avail of them. They cost you more than a normal personal loan does in the long run.

2) Repairs and Home Improvement

A home equity loan could save you some trouble later on. Most people take minor damage for granted and resolve to “fix it later.” Fixes and upgrades need to be dealt with as soon as possible. Apart from a home equity loan, you could also apply for a personal loan should your repairs be extensive. But with home equity and personal loan, only one guarantees financial safety. If you fall behind on payments, your home is collateral. You do not want to risk losing your home by taking out a home equity loan. Your best bet is a safe, personal loan as it is not only quicker to get, but there is no collateral.

If you have a home project that needs your attention or some repairs you have been ignoring all this time, you address them as soon as possible and apply for a loan.

3) Vehicular Financing

Cars are expensive affairs. Rarely will you find something affordable with an upfront cost. Most people spend a lot of their money opting for one-time payments on a vehicle. Applying for an auto loan is a smarter, wiser way to own your vehicle. Car leasing is manageable, but you need to provide your creditor with proof of income. However, you will have to return your car when the lease is up. Not only this, you are responsible for the car’s upkeep and gas. Why take on the costs of something you do not properly own? This is where personal loans for cars come into play. If you worry about missed payments and car repossession, simply buy a car on loan, picking a suitable interest rate and installment period.

4) Consolidation of Debt

If not controlled, your spendings and fees can team up and create barriers between you and your way to becoming debt-free. Credit card debt is one of the primary reasons why people apply for a loan. When you apply for a loan to pay off a consolidated debt, your creditor will offer you more than one interest rate and installment period. The best offer you will probably get is that of a 4% interest rate.

How can you rid yourself of your consolidated debt? Take a personal loan against it, and pay off the outstanding balance of all your credit cards and other expenses, followed by a single file payment to your loan servicer. You will be, in most cases, provided with a financial mechanism to pay off a consolidated debt. All you would need to do is pay and not work the equation. A loan is more manageable in this case than trying to pay the debt off on your own; you will only keep on adding to the balance.

Taking out a personal loan is wise so long as it fits your needs. They are saving graces in times when you’re backed into a corner by a financial crunch; there are certain instances when you need to avoid applying for loans. Do not go for a loan if you cannot afford it, if you don’t need it, or if there is a better option available that can get you out of your financial quicksand. Be sure to weigh all of your options first; money should not be borrowed without premeditation and on whims.