Personal loans are one of the easiest a person can take. Your biggest benefit? There are not many questions, no proof required other than proof of income, there are not many criteria to be met. This is different from other loans, such as education, where you need to show proof of admission, or a loan for a home, where the home is used as collateral and needs considerable income. While each bank offers personal loans, financial experts, including loan providers and websites, advise borrowers against taking them. Because?
The main reason is that these are one of the most expensive loans with very high interest rates. These are justified because the borrower need not provide a certain guarantee. The loan amount is calculated taking into consideration the current financial situation of the borrower and his cash flow, such as salary, income, profits and losses in the business, maintenance of other loans, etc.
But if the product is so criticized, why does it exist? Can Taking a Personal Loan Be Beneficial? Yes, you can, depending on the circumstances of the person seeking the loan. Here are three situations that justify taking out a personal loan, as long as there is no other option available, such as loans from parents or friends.
Paying off debt that has a high interest rate
If you are paying a loan that has a very high interest rate, while the personal loan is lower, it will be better to opt for the latter. You can use the personal loan to close the higher interest debt. For example, sometimes when people need money urgently, they lend a small amount of money lenders (banks, finance, cooperatives, etc.) where they only pay the monthly interest and promise to pay the principal at a later time. This interest is usually high. If you can pay the principal in less than six months, you can continue to pay the interest on a monthly basis. However, if you will take longer to pay the principal amount, it is better to go for a personal loan and use it to settle the loan before.
For example, it is common for people to get into debt and get involved with debt. So why not use a more reliable bank loan, repay debt and start a healthier financial life?
In addition, as a personal loan is with a bank, you will have the opportunity to create a good payment history that will in turn create a good credit history and a good relationship with the financial institution for future business. You can avail this tactic to get higher loans at lower rates.
Getting a loan can be the solution to your problems or a major headache. With certain planning, it is sure to be a light at the end of the tunnel. (Photo: www.ayounginvestor.com)
Paying off a large credit card balance
A personal loan can also be used to pay off a substantial credit card balance that has been rolled out for months. Paying only the minimum amount of the card bill will not help you, since the interest is charged on the total amount of the account and are very high. It is best to divert the money to pay the installments of a personal loan. You can save up to more than half of the card’s interest just by making this move.
Suppose you went out on a shopping spree and spent $ 2,300 on your credit card. You may be unable to pay this large amount in one go and can pay the minimum balance every month. However, after six months, you can still have a balance of $ 2,000. To clear this amount, you can use the following options: continue to pay the minimum amount each month, pay a lump sum each month or take a personal loan.
If you pay only the minimum amount, it may take up to 3 years to clear your invoice and the total payment will be over $ 4,500. If you choose the second option and pay a fixed amount per month, it will take less time to settle the debt. In this case, you will have paid more than R $ 3,000. The best option is to take a personal loan of $ 2,000 and settle the value of the card. You take less time to settle the debt and moreover you will pay less total interest.
Another advantage is that as the balance of the card will have been paid, you can continue to use it to pay for purchases as well as to withdraw the money in case of an emergency. However, learn to use the card so you do not fall into trouble again.
For higher education
The third scenario when taking a personal loan that can be considered good is for higher education. This will not be helpful at the graduate level as the duration of the course will continue to exceed the repayment period of the loan. In addition, the chances of getting a high salary to offset the outflow of interest is less.
This is most useful for a professional course. Personal loan can be used in situations where you need funds quickly for quick specialization courses, certificate courses and / or holiday courses. However, take this path only when you have no other choice.
The reason for this is a good option is that education is a good that will provide good returns throughout life. The price to pay for this is the interest paid on the personal loan and probably a simple lifestyle until the loan is repaid or you receive a lucrative job offer.
It’s no use taking the loan without planning. So it is important to put on paper how much you can afford per month to know how much you can get a loan and is able to afford. Your financial health depends on it.