Finance

Times When it Makes Sense to Take out a Personal Loan

Times when it makes sense to take out a personal loan

Conventional wisdom tells us that being in debt is a bad idea but, in truth, the vast majority of us spend at least a portion of our lives in some form of debt – household mortgages being the most common example. 

While it may indeed seem preferable not to be in debt, there are actually countless times when borrowing makes perfect sense. Below are just a few examples of when taking out a personal loan can be your best and most sensible option. 

Borrowing to improve your credit rating

Times when it makes sense to take out a personal loan

If you have a less-than-perfect or limited credit history, taking out a loan and paying it back on time can vastly improve your standing in the eyes of other prospective lenders. Credit scoring these days is more thorough than ever and if you have a history of mostly credit card debt, taking out personal loans, like those offered by OneMainFinancial, can actually help build your credit when you make your payments on time and diversify your borrowing.

Taking out a loan to consolidate credit card debts

While personal loans still incur interest payments, their rates are normally considerably lower than you will get with even the most competitive credit card. Transferring your credit card debts to a single, manageable loan can make your life considerably easier and will allow you to repay the amount quicker than having it spread across multiple credit card providers. 

Applying for a personal loan to cover home improvements or other large investments

Making improvements to your home is a form of investment – albeit not one you will likely benefit from immediately – however, using a personal loan to refurb your home can end up much cheaper than borrowing from providers (e.g. using store cards or other lines of credit). It will also cost less than putting the costs on credit cards. Upgrades to your home will add value in the long run – money that you will recoup when you come to moving on and selling your house.

Loans to cover other higher-interest debts

Personal loans are among the most competitive on the market. It may well make more sense to consolidate your debts into a single payment rather than spreading yourself too thin with the costs of multiple, higher-interest loans. For example, if you are still paying back a payday loan or other older types of borrowing, you will possibly find a personal loan will be cheaper. Note – before taking out a consolidation loan, you should check if your existing lenders charge early repayment fees.

Loans for life events

It is not normally a great idea to get yourself into debt just for a vacation, wedding or anniversary party, but should you find yourself short of being able to mark these important events and know that youare going to need to borrow, you will normally find a personal loan is your best option. These days there is a vast range of options available from an equally diverse spectrum of lenders – including online-only providers that are shaking up borrowing markets with innovative lending products. Search around for the best options – but always remember, what you borrow you will eventually need to pay back.
Also Read: 5 Pro Tips on Paying Off a Big Loan.

Featured Image: Background photo created by pressfoto – www.freepik.com

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2 Comments

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    ritesh
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    ritesh
    July 24, 2021 at 11:58 am

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