Should you get a personal loan? Is it a good idea? Learn more about the reasons why people get personal loans and if a personal loan is right for you.
What if you could get all the money you need with the click of a button?
A personal loan may be the solution you are looking for. But it's a solution that has both benefits and drawbacks.
So, should you get a personal loan? Keep reading to learn the answer!
What's a "Personal Loan?"
We've put together a complete guide to the benefits and drawbacks of personal loans. Before we go any further, we need to define exactly what this kind of loan really is.
And the name pretty much says it all: a personal loan is money that you borrow for some kind of personal reason. And the exact personal reasons may vary.
In this way, such loans are more versatile than, say, car or home financing. But like those other loans, this debt must be paid back in regular installments along with interest.
Whether you are approved for such a loan depends on your credit score. And even if you are approved for the loan, your exact credit score will dictate what interest rates you are offered.
Keep in mind that you can apply online through institutions like Bonsai Finance. And to figure out if such a loan is right for you, keep reading to discover the exact benefits of such a loan.
Did you know that most Americans don't have enough money put away in savings? In fact, 40% of the country is only one missed paycheck from poverty.
So when a financial emergency comes along, you may not have enough money set aside to deal with it. And that's where personal loans come in.
Imagine that your oven dies the week before Thanksgiving dinner. With Black Friday around the corner, you may not have the money for a major appliance. But personal loans can help you make the payment and ultimately save the holiday!
Some people are leery of loans because of the interest. After all, you don't want to be saddled with a huge debt if you can avoid it.
However, you can use loans to actually avoid a larger debt. And it all comes down to taking out your credit card debt.
You can get a personal loan at a lower interest rate than one (or more) of your credit cards. Next, you can use the new money to completely pay off the old debt!
Sure, you're still stuck making monthly payments. But those payments will be for a lower amount because of the lower interest rate.
And that means you have extra money in your pockets at the end of every month.
With the exception of long-term events with uncertain price tags, personal loans are a way to handle special occasions. And these occasions may range from celebrating a new life as a couple to saying goodbye to loved ones.
For example, weddings are often pricy affairs. Things like venue and catering costs quickly add up! But personal loans can help you make this day just as special as it deserves.
On the opposite side of the coin, funerals can be surprisingly costly. Caskets and wakes make the costs rise at a time where you may feel emotionally devastated. A personal loan can help you pay for these unfortunate costs while also helping you avoid the stress that comes from losing a loved one.
What's the last category where you should consider personal loans? Simple: when you have home renovations you wish to make.
For example, many homeowners dream of renovating their kitchens and bathrooms. But they soon find out exactly how expensive such a renovation can be.
Personal loans let you get started today instead of putting off those renovations for years. And this gives you more time to actually enjoy your home the way you have always wanted to.
You should know that homeowners may also be able to pay for such renovations with some kind of home equity line of credit. The decision between the two usually comes down to the amount of equity you have and which interest rate is better.
Now that you know when to get personal loans, here are a few instances where such loans are the wrong decision.
Not for Cars
It's true that almost everyone uses some kind of loan to purchase a car. However, personal loans are a bad tool for this particular task.
With a car purchase, you'll likely be making payments for at least 5 years. Because of this, you'll want to get the lowest possible interest rates.
This is why most people pursue automotive loans through a dealership or even through their existing car insurance company. Most of the time, such loans have a better interest rate than personal loans.
Not for College
Some of the scariest debts come from college-related costs. Tuition, books, dorms, and more all make that cost even higher!
Before pursuing personal loans for college, you should submit the FAFSA online. It will determine your eligibility for subsidized loans, unsubsidized loans, Pell Grants, and more.
Those loans typically have a lower interest rate than personal loans. And by filling out the FAFSA, you may discover you qualify for scholarships or grants that do not need to be paid back at all!
Not for Getaways
Remember when we said personal loans were good for special occasions? The main exception to this rule is personal vacations.
This is mainly because vacations don't have a fixed cost. If you're not careful, it's easy to borrow too much or too little money.
Plus, it may get a little too tempting to borrow money whenever you want to get away. Save yourself some debt and just put money away each month for your dream vacation.
Should You Get a Personal Loan? The Bottom Line
Now you have the answers to the question: should you get a personal loan? However, it's also important to know where you can get the best loans online.
We make it easy for you to apply for the money you need from the comfort of your own home. To start taking care of your financial needs, come apply for a loan today!