Personal loans are meant for personal use, just as suggested by the name. There are so many instances where people may just need funds for personal use. These types of loans are often unsecured, which means that you don’t need collateral for approval. In most cases, your credit score plays a fundamental role in determining whether the lender will approve your application. If you have a lower score, it means you pose higher risks to the lenders and the chances of being approved will be relatively lower compared to someone with a higher score. For this reason, it is very important that you maintain a good score.
There are so many types of personal loans out there, and some of them have lower rates. Since any loan represents an obligation you have to respect, it is important to go for lower rates. This means the loan is affordable. However, very lower interest loans can be a snare. You may find yourself accumulating so many debts than it is really necessary. Money lending companies cannot prevent you from taking personal loans because they are in business. The interest you pay represents profits they receive for allowing to use their money.
There are so many people who will advise you on the circumstance you can actually borrow. Nevertheless, very few will ask you to examine whether you are making the right decision. Should you borrow any time you are in need? When it comes to good financial behaviors, you are advised to borrow as minimum as possible. You have to avoid debts if you really dream of being a financially independent person. Qualifying for a loan does not mean you should really go for it. There are times when you may be in need but taking a loan may not be a wise decision. Similarly, you may qualify for a personal loan, or get a higher limit but still, it becomes unwise to borrow. Our today discussion today is addressing the best time to take a personal loan.
Let us then start.
When It Is Appropriate To Take a Personal Loan.
At the outset, we mentioned that there is a time when borrowing may not be wise. By the same token, there are times when borrowing may be absolutely necessary. Let us examine the following three conditions representing the best time to borrow:
Taking a personal loan in order to consolidate debts.
It may be very important to take a personal loan with a view of consolidating debts. In most cases, people take personal loans when they are overwhelmed by credit card loans. It is also possible to use a personal loan to settle other loans especially the high-interest ones. Let us illustrate this. Generally, lenders charge different rates. You can shop around and come by a loan with a lower rate but equals the sum of all the debts you owe. Once you are approved, use the funds to settle all the existing debts. In the end, you are going to remain with one loan, meaning that you will be required to make only one payment each month.
By so doing, you will save a lot of money through interest payments. What is more, most of the personal loans have a loan durations ranging between 1 and 5 years. This means you are going to have adequate time to put everything in order and pay the loan in the most effective way. This is also beneficial in another way. If you were overwhelmed with credit card loans, you were at risk of damaging your credit history as well as lowering your overall score. But as you make monthly payments in good time, your score improves. Your credit history will as well, reflect timely payments and this improves the chances of getting approved for other loans.
When there is a money-making opportunity.
An opportunity may arise that requires you to use funds to earn more money. In this case, it makes sense to take a personal loan if you don’t have money. Let us illustrate again. You may need to scale up the operations of your business. Maybe you need additional working capital. As your business grows, the demand increases. You need to scale up production in order to meet customer needs. Besides, you may need to start serving a new market and this requires more funds even for brand promotion. What if there is need to upgrade technology or equipment in order to maintain a competitive edge in the market? You can take a personal loan and use for these purposes in case your business does not qualify for a business loan or their other circumstances that do not favor that.
Well, the circumstances portrayed only relates to business needs. But it may also be absolutely necessary to take a personal loan to upgrade your home’s value. Besides, you may want to enroll for a course that will benefit you career-wise. It may absolutely important that you take a personal loan. However, you need to be very careful and do them properly. This is a risk you are taking and may become fruitful or fail. For instance, there cases where business expansions have failed to materialize and led to loses. Similarly, a decision to upgrade the value of your home may not result in value gain because of there so many factors that play significant roles. The best thing to do is to do the math and consider it a risk. But these are opportunities that can earn you more money.
When there is an emergency.
We call them emergencies because they come unexpectedly. There are times you are likely to greet into a state where you do not have funds to meet unexpected costs. If you do not finance them, there may be acute consequences. What do you do in this case? Obviously taking a personal loan is the wise thing to do. Let us illustrate. You are confronted with a medical bill which if not settled will be transferred to a collection and detriment your credit score. Or maybe you need to m finance repair of your home to avoid risking lives. What if your car requires costly a repair? It may be wise to take a personal loan. You can compare different lending institutions here at Loan Advisor.
These three circumstances clearly illustrate when it may be necessary to take a personal loan. But what if I tell you it is still not the wisest move? You are supposed to have an emergency fund set aside to finance unexpected costs. Why can you use savings in these conditions? It is important to save use the funds in difficult situations rather than borrowing.
The Best Time to Take a Personal Loan.
So then what is the best time to take a personal loan? We have discussed some important conditions which when you encounter, it may be wise to go down that road. But then ask yourself the following question:
- Will loan consolidation results into saving funds?
- Will the emerging condition offer you a practical opportunity to earn more funds compared to what you are borrowing?
- Am I borrowing for an absolutely emergency condition that I must pay?
If your answers to the above question are yes, then you are in the best time to take a loan. Simply put, there is no one best time to take a personal loan. It will always depend on prevailing conditions. Make a wise decision.