In the realm of personal finance, personal loans are often shunned and disregarded as inefficient financial decisions. They’re seen as a last-resort choice for the financially irresponsible. Well, the tides seem to be shifting and people are taking a liking to secured and unsecured personal loans. They’re becoming increasingly popular among those who would be considered “judicious” borrowers for their many benefits. There are many good reasons why you might want to take out a personal loan for yourself or your close ones. Take a look at the below examples and see how a personal loan might come in handy.
Higher borrowing limits
When you compare credit card limits to personal loans, the differences are quickly apparent. The average credit line size for most users is around 6500 dollars for prime borrowers, and up to 1250 dollars for subprime borrowers. A card’s spending limit is determined by the range that the card issuer or network decides. As you might have guessed, lower limits are reserved for applicants who just barely pass the mark for taking out a card. This is precisely why the numbers remain low for subprime borrowers.
These borrowing limits also tend to vary between the type of card or service used. Secured credit cards will only offer around three hundred dollars to weaker applicants, while stronger credit would allow users to borrow up to five thousand dollars. No-annual-fee cashback cards differ from these, and limits range from 2500 dollars to ten thousand dollars. There are many factors that determine the borrowing limit, and they mostly favor good credit and strong applicants.
The same goes for personal loans, but there’s a lot more leeway involved. The borrowing limits are a lot more generous than you might see in credit card loans. These also depend on the lender in question, but you can get a good idea of the average amount lenders might offer to a beginner borrower. In most cases, the cap loan principles range from twenty to thirty thousand dollars. This makes these loans a lot more convenient for borrowers that require a larger sum. With good credit, these loans can even go up to a hundred thousand dollars, making them vastly superior to credit in this regard.
Buying a new car
Buying a car is a pretty big financial move for just about everyone. It’s a huge expense, sure, but it also provides an individual with some much-needed mobility. It allows for a longer commute, opening up new job opportunities for the person buying the car. It also makes it a lot easier to get around any city or town. It’s considered a rite of passage into adulthood, alongside getting a driver’s license. This is why so many people feel it’s crucial that they get their car situation in order and purchase one.
Not everyone will have the immediate funds to buy a car. The aforementioned benefit of a longer commute has two sides to it. What if you don’t have a car but want to buy one? You have fewer job opportunities that will land you enough money to buy a car. Having a car might open up these opportunities and then you could buy yourself a new car. This is a common enough issue that many have decided to take out personal loans to finance their first vehicle purchase.
Personal loans are especially helpful with long-term financing of a vehicle. You can think of it as being similar to debt consolidation. You receive the loan proceeds, and then forward the money you now have to your bank to pay for the vehicle.
In most cases of vehicle purchase, personal loans are taken out to buy a car. This is because it’s a justified expense that opens up new opportunities. However, there’s no limitation that says it must be a car. What if you need a truck for your professional needs? The lender won’t have issues lending you the money either way. You can use a personal loan to buy just about any vehicle. Motorcycles, cars, trucks, and even boats are viable options. As long as you turn it into a viable investment decision, you shouldn’t have any problems with the loan.
Taking a break
Everyone needs a break every once in a while, just to unwind and relax for a few days. This is why stress-free vacations are so important. People that overwork themselves and skip out on vacations don’t end up being more productive. In fact, they end up doing quite the opposite; they start to burn out. It’s a common occurrence in today’s hectic work environments, which is why individuals end up burning out sooner than they expect.
The importance of vacations isn’t lost on everyone, though. Lots of people try their best to enjoy at least a couple of days of rest after a busy work period, even if their circumstances don’t easily allow for it. Both time and money are common problems for people looking to take regular vacations. Without time off from work, it’s unlikely that you’ll be able to enjoy more than a single weekend of your vacation. At the same time, the funding is crucial, as you need to travel and eat food along the way to actually participate in the vacation.
Luckily, the funding part can be solved with a personal loan. Taking out a personal loan gives you a lot of breathing room for vacation financing. You aren’t limited by where you can travel. A substantial loan can get you the vacation of your dreams with your family or significant other without having to worry about how to fund it. You can pay off the loan at a reasonable rate later on, and enjoy the benefits of a well-deserved vacation and the memories that come with it.
Dealing with sudden expenses
Everyone has to deal with bills on a regular basis. There are some things you have to pay on a monthly and yearly basis, while other things you only have to deal with once. Many organize their expenses and payments so that they know exactly what funds they have at the end of each month. It’s a great way to solidify your financial situation and slowly move on from there. However, this implies that all types of expenses are predictable and don’t deviate from the norm. What happens when you’re suddenly faced with a large and unexpected expense that you have to deal with?
What if you require medical diagnostics or a life-saving procedure? If the heating breaks down, you’re not going through the winter without it. Some expenses can be out of reach for your current savings. For most people, this can mean taking quite the financial hit. If you don’t have a large amount of money saved up, you’re unlikely to be able to deal with this expense without sacrificing something else. Taking funds away from regular monthly expenses will only take you further into debt, which is why this option might not be the best one available.
Instead, what a lot of people do is take out a personal loan to deal with unpredictable, sudden expenses. This is a great way to keep your regular finances stable and organized while also dealing with anything that comes up. You shouldn’t allow an unforeseen event to destabilize your financial situation. A personal loan can be paid off in small increments, which will allow you to gradually recuperate your losses.
Debt consolidation and resolution
Debt is a normal part of any individual’s finances. Money flows in and out of your household, and the numbers might not always end up in your favour for one reason or another. While it may seem stressful at times, every kind of debt can be managed and settled within a reasonable amount of time.
The most stressful aspect of various kinds of debt is interesting. It’s the definite reason why debt is so scary at times. If you find yourself in a difficult financial situation, any debt you have will only balloon in size, leading you to further financial difficulties. This is a situation that is all too common in Australia, and individuals search for alternative ways to handle their debt to prevent this from happening.
This is one more situation where a personal loan can come in handy. Consider the terms of most of your debts. Sometimes, they are less than favorable, leading to quick interest build-up and additional stress on your finances. However, the terms of many quality low rate personal loans are a lot more flexible than most other debts. You could borrow funds to pay off debts that are more immediate, and then pay off the personal loan at a more desirable place. This is a great way to delay the onset of interest and save lots of money in the short and long-run.
Some loans even allow for something called “debt-consolidation”. You allow the lender to take on your debts, while you agree to a more long-term loan payoff process. You can give yourself more time to deal with a bad financial situation without worrying about interest piling up and ruining it further.
Financing a wedding
There are very few days that are quite as important as your wedding day. Whether you’re the bride or the groom, you want to make sure that your wedding is a special day it’s supposed to be! If there’s something that you think would make the wedding better, you’re probably going to want to add it to the mix.
The issue of weddings is that they’re very expensive. So much so, that it’s become a staple of popular culture to criticize weddings for how lavish and costly they are. The cost of weddings is something that engaged couples are willing to pay, as it’s the most iconic event of their relationship. It’s hard to put a price on something that important.
When you have to put a price on it, it helps to have some financial backing. Very few couples have the funds to spare to create a lavish wedding, which is why a lot of weddings are partially funded by family members like parents. Those that wish to finance their own weddings often seek additional sources of funding. In many cases, these sources include personal loans.
A personal loan can easily cover the costs of any wedding. It’s a pretty simple solution to a financial problem that seems insurmountable to many young couples. The good news is that you don’t have to be in a rush to agree to any personal loan. Take your time to find one with manageable rates and you should be set for your dream wedding day.
Easy finance management
When discussing payment options, personal loans often get a bad rep. They’re seen as a more desperate financing option, at least compared to something like a credit card. The numbers seem to suggest otherwise.
A single, fixed-rate personal loan is a lot easier to manage than multiple credit cards. Credit cards have different spending limits, interest rates, and issuer policies that are difficult to keep track of. It’s easy to overreach with a credit card and put yourself in debt, as many Australians are already aware. This is where personal loans have a distinct advantage. You know exactly what you’re getting yourself into and there’s very little chance that you unknowingly make a mistake and ruin your finances.
If you manage your loan well, it could end up being a lot more efficient than taking out another credit card. Another great benefit is that you don’t have to watch out for four of the same type of loan. Instead, you just have to look after a single loan and manage it.
There are many reasons you might want to take out a personal loan. There’s a reason they’re becoming increasingly popular and important forms of financing. They come with some very nice benefits for the borrower, and they’re quickly proving themselves to be superior to credit cards and other types of loans. If you find yourself in any of the above situations, consider a personal loan, as it could help salvage a bad financial situation
The article was written by Stella Ryne.