Why Should You Take a Personal Loan?

29 Sep 2020

When you are facing a financial emergency or need funds for a personal project, what is the first source you would turn to? Some might say that they would be ready to ring up huge bills on their credit card while others would ask for financial help from relatives or friends. But there is another option to consider apart from these, and that is a personal loan. All of you have heard about a personal loan; let’s focus on aspects associated with it.

Understanding Personal Loan

As the name suggests, a personal loan is highly helpful in meeting personal financial emergencies. Unlike a mortgage or car loan, you can use the loan amount for any purpose. It is an unsecured loan which means there is no need for collateral. Once you are approved, you will get a lump sum amount to your account upfront which has to be repaid in installments over a predefined tenure along with interest. The rate of interest on personal loans is higher than that on secured loans but lower than credit card APR. Competitive rates of interest offered by different lenders in the market along with simplified terms add to the reasons why you may consider taking a personal loan.

When should you consider taking a personal loan?

Technically, you can take out a personal loan for any reason whatsoever, but here we have listed a few common circumstances under which it makes more sense:

  • Making high-ticket purchases such as home appliances
  • Financing a home remodeling or renovation project
  • Consolidating multiple credit card debts
  • Refinancing high-interest loans
  • Undergoing a costly medical procedure such as a surgery
  • Meeting the working capital needs of your small business
  • Moving to a new location
  • Wedding, vacation or for other leisurely purposes

Why should you take a personal loan?

You can take a personal loan under any of the aforementioned situations above that you are financially ready for additional debt. If you are still confused, here are three main reasons as to why you can consider taking a personal loan:

  1. The Flexibility of Usage- This is the most significant benefit of a personal loan. There is flexibility in order to end-use which gives you freedom of how you would like to utilize the loan amount.

  2. Unsecured Loan- Personal loans do not require you to submit collateral security thus making it more beneficial for users who do not have any asset to pledge as collateral.

  3. Competitive Personal Loan Interest Rates- The rate of interest on the personal loan is lower than that on the credit card which makes it a great alternative to a credit card for making high-ticket purchases. Moreover, you can take a personal loan for debt consolidation to save on the total interest outgo.

While a personal loan can be quite helpful under several circumstances, users should not forget that it is also a type of debt. Hence, depending on your situation, it may or may not make sense to take a personal loan. For instance, if you are paying huge interest on three different credit cards, then a personal loan is definitely a great option to consolidate these three separate debts into one. However, you should avoid taking personal loans for discretionary expenses such as a high-ticket purchase or a vacation.

Saving up for such expenses in advance is always a better option than taking out debts for the same. Taking a personal loan for home remodeling/renovation/extension may also be a good idea as you would be able to raise sufficient funds without having to pledge your house as collateral. In addition to this, a personal loan could also boost your credit score if you service it regularly on time.

The bottom line is that personal loan is quite an easy way to fund big expenses. With this, you can avoid putting a valuable asset at risk, save on the interest outgo but all of this comes at a cost and with a bunch of terms and conditions. Hence, it is always a smart move to weigh all the options available to you against the costs of a personal loan and then take the final step. Come to Afinoz, dial 0120-411-0376 and we help you avail best personal loans.

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