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Are you wondering when does a personal loan make sense? You are not alone as many people have asked this question. The good news is a great deal of them found their proper reason.
When should I get a personal loan? Find an answer to this question and discover how personal loans can help you get through the coronavirus pandemic.
Just in the last 3 years, the amount of outstanding personal loan debt grew rapidly from $100 billion in 2016 all the way up to $156 billion in 2019.
This isn’t a surprise given the fact a personal loan can help you solve your financial struggles. It can be a lifesaver especially in situations like the current one where we have to deal with the negative impacts of COVID-19.
To decide if a personal loan is the right decision for you let’s take a look at some of its main characteristics.
What is a personal loan?
It is typically an unsecured loan which means it requires no collateral such as your house or your car. Of course, if you choose to take out a secured personal loan you will pay lower interest rates.
The repayment period is typically between 3 to 7 years and the APR could range from 5% to 36% depending on a number of factors like your credit score, annual income and debt-to-income ratio(DTI).
The majority of personal loans come with a fixed rate, so your monthly payments stay the same for the whole period. There are also variable-rate loans. However, bearing in mind the upcoming recession, it is not a good idea to get a variable-rate loan. Interest rates are likely to surge and you will end up paying much more.
Now that we examined the basics, let’s continue with our list of 3 top reasons to get a personal loan we prepared for you. We also included a special bonus that is going to help you make the best decision for your loan.
So without further ado let’s begin with
1. Having expenses you can’t postpone
Have you ever been short of cash but can’t afford to put off an expense? It has happened to all of us at a certain point in our lives. Sometimes you just need that home repair or funding for a special event, like your wedding. In the pandemic outbreak, even people with solid savings can face financial difficulties.
Therefore, it is important to know your options. Rest assured, there are personal loans you can get during coronavirus. If you lost your job you will have a hard time qualifying for any loan without a co-applicant. Despite this, your best shot is to try with online lenders.
The application with online lenders is not only faster, with some being able to fund you in 24 hours, but is also more flexible. These companies often include non-standard factors like your education, area of study and employment history when assessing your loan eligibility.
Some banks such as HSBC also offer an online personal loan application. However, most banks providing unsecured personal loans will demand a great credit score. Another disadvantage of getting a loan from a bank is that the payout is usually slower. On the contrary, most banks provide competitive rates.
Another option is to get a loan from a credit union. In the majority of cases, you have to apply in person and the wait times for disbursing your funds are again slower compared to online lenders. However, credit unions can provide good rates and are open to working with people with lower credit scores.
2. Consolidate Credit Card Debt
Another prevalent reason for taking out a personal loan is debt consolidation. If you have one or multiple credit cards with a maxed-out balance, you can get balance transfer cards which allows you to transfer your existing debt to a new card with better payment terms and interest rates.
In this case, you are doing yourself a favor by having only one fixed monthly payment to worry about. What‘s even more amazing? The interest rates on your loan could be remarkably lower than your credit card’s APRs.
In this scenario, it makes perfect sense to get a personal loan to consolidate debt. However, there is another great option. You can take advantage of some amazing 0% APR cards to get you through the COVID-19 recession. 0% APR cards allow cardholders to make purchases without having to pay interest for a certain period of time.
Nevertheless, you should be self-conscious when implementing these strategies. Your cleared credit card balance or 0% intro interest APR may trick you into spending more. This can ultimately get you in lots of trouble and even more debt.
3. To refinance an existing loan
If you already have an existing loan taking out a personal loan to refinance it may save you tons of money on interest. Let’s suppose you now have a better job and a higher income than the one you had when you initially took out the loan. This can get you better rates on a new loan.
You can also take advantage of the same method if your credit score has improved.
You are probably thinking that is not an easy task. People often struggle with this but actually it doesn’t have to be that hard. You can see what we did to increase our credit score to 800.
As with everything there is an easy and a hard way. You can go from lender to lender in search of something you qualify for and put up with the long and tedious process.
Or you can simply use a website like guidetolenders to compare a multitude of personal loan offers you qualify for in minutes. You can choose from a wide range of personal loan types that are bound to meet your specific needs.
You just fill out a simple form that takes a few minutes and get matched to the perfect lending partners. Then you can compare the rates and choose the best loan for you. Moreover, you don’t need to worry as this doesn’t affect your credit score in any way.
What’s the best part? It is absolutely free and you can get your money in as little as 24 hours from successful approval. You might think where is the catch, but there really isn’t one. Lenders have set the rules for too long. Now you have the opportunity to make them compete for you as a client and in our opinion, that’s the way it should be.
Nevertheless, before you hurry to find your best offers, you should know that there are some instances when you shouldn’t get a personal loan. We don’t recommend taking out a loan to spend the money on luxurious items or events that are a want instead of a need. Instead, save up to finance those purchases.
Furthermore, you should be very careful not to fall into the trap of personal payday loans and become a victim of a deadly cycle of debt
Get the best personal loan and cover your financial needs today
Taking out a personal loan to cover your basic expenses isn’t a shame. However, you should always make sure to get the best offer you can!
The solution to your financial problems is in your hands. We gave you the tools. Just use a comparison website like guidetolenders or apply for your 0% interest APR credit card today to be one step ahead of the troubles tomorrow.