If you require funds, a personal loan is your best bet. Compared to credit cards, personal loans have a much lower interest rate and a longer repayment term. While personal loans are a great option if you are in a pinch, make sure to not take them unless you really need the money.
Right Ways to Use a Personal Loan
Repaying credit card balances: If you carry a balance on your credit card, you could be paying a high-interest rate, that can go as high as 17%, on the balance. If you find that you are unable to repay the balance completely, it’s best to take a personal loan to repay the outstanding debt on your credit card.
Home renovation: Updating your home may cost you thousands of dollars. If you don’t have the required funds ready to pay for your home renovation, you can borrow a personal loan. However, you should remember that updating your home may also increase its value, which may lead to higher home insurance premiums, as well.
Medical expenses: There may be certain treatments that are not covered by your health insurance policy. Given how expensive medical treatments can get, you can consider getting a personal loan to pay your medical bills.
Wrong Ways to Use a Personal Loan
Vacation expenses: Don’t take a personal loan to cover your vacation expenses. While your vacation may last a few days, you’ll need to spend years repaying the borrowed amount.
To invest in the stock market: While investing in the stock market is great, make sure to not do it with borrowed money since there is no guarantee your investments will do well.
To buy a car: If you want to buy a car, consider getting an auto loan since it is likely to have better interest rates.
To gamble: When gambling, there’s always a chance you could lose all your money. If you gamble with borrowed money, you’ll additionally have to spend the next few years repaying the loan with interest. So, avoid doing this at all costs.
Applying for a personal loan is quite easy. However, it is important to read the fine print and be aware of all the charges. Once you take a personal loan, ensure that you don’t miss any repayments and have a clear plan to repay the entire amount.