When Should You Consider a Personal Loan?
Things to consider before you make the decision
Personal loans, unsecured small loans used for personal purchases and debt consolidation, are becoming more popular in this increasingly unstable economic climate. Discover Financial Services stated that during the second quarter of 2011, they had a $640 million increase in personal loans over the same quarter of 2010. But while these numbers show growth in personal loans, they give no indication of why the growth is occurring.
It's not easy to decide what financial events dictate the need for a personal loan, but general guidelines to follow include these:
Emergencies happen whether or not you are prepared for them. Animals get sick and create vet bills without consulting your budget; expensive fines and tickets are levied without the least bit of consideration for your bank account balance. Getting a small personal loan to accommodate these emergencies and give yourself a little extra time to pay for them can help you avoid a major financial disaster, the loss of a treasured family pet, or additional penalties.
There are some home and auto repairs that can be more expensive to ignore than to fix. But if you don't have the money to fix them, you may be forced to insufficiently repair them or simply ignore them until they become so troublesome that your ability to work and preserve your assets is compromised. Getting a personal loan to take care of a small repair before it becomes a big, expensive one makes sense.
Occasionally, consumers need bridge loans in order to bridge the financial gap created by the liquidation of an asset. A personal loan can accommodate the short-term need at very little cost, since the eventual receipt of the money the borrower is expecting can pay off the loan early with little interest penalty.
Reducing overall expenses
If you have high-interest credit card debt, IRS fines and interest, or any other debt that is growing exponentially as a result of high interest rates, then a personal loan with a lower interest rate than those individual debts will save you money in the long run, making it a savvy financial decision.
The most important consideration when taking out any kind of loan is determining whether you can meet the payment requirements and pay back the loan. Combine that fact with the information above and you are on your way to making the right decision for your budget.
Contact us to see what options we have that may work for you.