The average American is $38,000 in debt.
So why would they want to add to it with a personal loan? Well, there are many reasons why a personal loan could be the answer to some of your financial woes.
In this blog post, we'll go over some of the reasons why people get personal loans and help you determine if one is right for you and your family.
You're likely reading this article because you've been wondering, "Should I get a personal loan?"
Well, we're here to help. Read on for more about some of the situations that warrant a personal loan.
Getting a personal loan to pay off debt may seem a little bit counterproductive, but there are many reasons why people choose this route.
A personal loan has many benefits to credit card debt, and it allows you to pay on your debt each month in one place instead of having to pay 5 different credit cards each month.
Credit cards are never-ending debt, meaning that the loan terms renew each time you make a purchase. With a personal loan, the debt has a shelf-life, meaning you work out how long you'll pay the loan off for.
Many times, you'll also pay less interest on a personal loan than with a credit card. And once it's paid off, it's paid off. You won't be able to take out any more debt, unlike a credit card, where you take out more debt each time you make a purchase.
Do you have a specific project in mind that you can't afford outright, but you don't want to use a credit card for? If so, personal loans might be the best option for you in this scenario.
A project that you finance a personal loan with is typically one that has nothing to do with your business. If you need a business loan, that's what you'd take out.
Instead, with a personal project, you'll take out a personal loan. Very often, people take out personal loans for remodeling a room in their home, installing a pool or building a deck. This way, they can pay for a big-ticket item upfront, and pay it off over time.
Because personal loans have a lower APR than other loans, and there's a specific time frame to pay it back, it's great for those who have one project to finish to enhance their personal lives.
Are you a hobbyist whose favorite past times cause a dent in your wallet? If so, you might want to consider a personal loan. Again, this is separate than any business you might run in conjunction with a hobby.
Say, for instance, you're into DJing, but you're not looking to do it professionally or to turn a profit. The equipment isn't cheap so you can use a personal loan to buy it upfront. You'll then pay it off in easy installments with payments you've agreed to.
Taking out a personal loan if you can't afford to pay it back isn't a good idea. But if you have a steady job and good credit, and need fast money for something that's come up, a personal loan can come in handy.
An emergency that might necessitate a personal loan could include medical expenses that aren't covered by insurance, travel expenses to see an ill loved one, a funeral, emergency vet bills or repairing your home if something's gone wrong unexpectedly.
Many of these emergencies are covered by an insurance of different sorts. And while insurance is fabulous, they won't always pay upfront for things, leaving you to foot the bill and wait for reimbursement. With a personal loan, you can pay now and receive the treatment or services you need, and then pay it back when the loan hits your account.
Taking out a personal loan is great for many different situations, but for some people, it isn't the best idea.
If, for example, you simply need more money to get by each month, a personal loan isn't the way to get you through the lean times. Instead, the personal loan will actually cause more trouble, as you'll end up with even more debt that you were in previously.
You also shouldn't take out a personal loan if you're not sure if you can pay it back during the time frame you've agreed to. Not paying back your personal loan can have serious consequences, including being sued by the bank or lending institution for the full amount plus interest. If this happens to you and you can't afford it, you'll have to file for bankruptcy in order to get out of the loan.
Sometimes, you can set up a payment plan, but it is advised you don't get into this situation to begin with.
If you're still asking yourself, "Should I get a personal loan?" the answer is something you'll have to weigh in on yourself. Consider the pros and cons of taking out a personal loan, and whether it will help or hurt your situation, both now and in the long run.
Taking out a personal loan can be a great way to do something you couldn't otherwise afford, but not being responsible with it can land you in hot water.
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