Thinking of Taking a Personal Loan? Here’s When it Makes Sense
Last Updated : July 15, 2020, 4:15 p.m.
The best thing about a personal loan is that it can be used for numerous purposes. You can use it to meet any financial requirements such as wedding, education or any other, much unlike a home loan or car loan which is taken for a particular purpose only. Personal loans are collateral-free and come with a higher interest rate compared to secured loans. So, you need to find the right time and take a personal loan for the right purpose . Read this post that tells you the same in detail.
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Take a Personal Loan When You Want to Consolidate Your Credit Card Debts
Getting a personal loan to consolidate or clear the credit card debt is a wise move, mainly because the interest charged by credit cards is generally higher compared to a personal loan. So, paying it off with a personal loan will likely save on your interest payout. And the clearing of debt and repaying the same with a personal loan will again improve the credit score. However, before you apply for a personal loan, closely evaluate the interest rates applicable to your credit card and the new personal loan, and go for it if you think that it will save you more.
Take a Loan When Faced with an Emergency
A personal loan often comes to the rescue when faced with a cash-strapped situation. Because getting a loan ensures quick liquidity and helps maintain dignity. It is ideal to have in place an adequate emergency fund and a health insurance plan to tackle emergencies. And if you are not prepared, you should apply for a personal loan.
Apply When Personal Loan Interest Rates are Comparatively Lower
You should compare the interest rate when you apply for a personal loan. Don’t apply for a loan in a hurry because you may end up paying a higher interest amount. Choose your lender by knowing all aspects of the personal loan offer, like loan amounts, interest rate and the repayment period. Because if you borrow a personal loan at a lower interest rate than others, you’ll save more.
Apply When Processing Fee is Lower
Banks and financial institutions charge a one-time fee from the customer which is debited from the loan amount. The net amount is disbursed to your bank account. However, the interest will be charged on the applied amount. So, as a responsible borrower, you need to check the lenders that offer personal loans at a less processing fee. This will ensure the net amount is not much lower than the applied amount and give you more funds to meet your needs.
Borrow When You Fall Short of Meeting Wedding Expenses
You could borrow a personal loan for wedding expenses. If you fall short of funds for a wedding, a personal loan will help you. It is the perfect alternative to get instant funds in a short period. You can also withdraw funds from your PF account to fulfill the financial requirement. But if the savings in the PF account isn’t much, there’s no use taking out funds from them. You could then fill the fund gap with a personal loan.
Consider these points while you apply for a personal loan so that you enjoy the loan journey and not curse it later on.