We know the ideal scenario. Never get into debt. But for many people, some debt is necessary. Unexpected things can happen that require you to take on some temporary debt in the form of a personal loan.
Today we welcome Shiv, a finance geek who will walk you through different scenarios. You’ll learn why a personal loan can help in these money situations.
Over to you, Shiv.
It’s true that secured loans such as home loans or car loans attract low-interest rate while credit cards give you the power to borrow money at extremely high interest.
In a market as extreme as this, isn’t it nice to have an option that is the best of both the worlds?
Turns out a personal loan is just that.
Like credit cards, a personal loan is an unsecured loan that allows you to use the money for whatever purpose without the risk of losing your assets.
But unlike credit cards, the personal loan interest rates are much lower, and their repayment options are more flexible. These features can help you save money in interest over time.
Here are 5 situations where a personal loan can make great financial sense:
1. Finance Huge Life Events
There are no secured loans for many big events in life, such as experiences, occasions and emergencies and these events can’t be used for collateral.
Personal loans can finance almost anything. Be it a wedding or a serious event like a medical emergency, a personal loan covers your expenses with no questions asked.
2. Home Improvements
Do you have an itch to renovate your bathroom or remodel your kitchen?
You can opt for a collateral-free personal loan without risking your assets such as your home.
If you miss your payments due to the unforeseen circumstances like a job loss or an accident, you don’t risk losing your home as it is not put up as collateral for your loan.
3. Buy a Used Car
Some used cars are great bargains, but there are not many lenders out there who want to sanction loans for cars that are over 5 years.
Even if they do, the interest rate charged is high.
If you’re low on cash but can’t get over the bargain car deal, take a personal loan to finance the car.
4. Pay for Your Child’s Higher Studies
If you are planning to put your child for higher studies either in India or abroad, consider taking a personal loan.
The personal loan is so flexible in its usage that you can use the funds not only to pay the education fees but also to cover education-related expenses like travel, accommodation, food bills, electricity bills, shopping and groceries.
5. Consolidate Credit Card Debt
By consolidating your multiple credit card debts with a low-interest personal loan, you not only get rid of the hassle of making multiple payments, but you also save money.
With a personal loan, you pay off your debt faster than you would through credit cards.
Using a personal loan to pay your credit card debt can also help you improve your credit score by expanding your credit mix and lowering your credit utilization ratio.
The lesson here?
Personal loans are an affordable finance option that can be used for any purpose you deem fit.
You can purchase big-ticket items or finance unforgettable life experiences – a personal loan covers it all with no questions asked.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at firstname.lastname@example.org.
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Thanks for sharing this!