A personal loan can be good for any purpose where you need to borrow money from a bank and pay it back in installments with interest. Deciding to take out a personal loan can be a big decision with long-lasting consequences. There are many loans available from different lenders, and each has its own pros and cons. It is important to understand them before you take out a loan that will impact your financial future. So, here’s a breakdown of personal loans to help you make an informed decision about whether it’s right for your wallet.
If You Have to Consolidate Credit Card Debt
If you carry a high balance on one or more credit cards with high-interest rates, develop a short-term plan to pay off the debt. Don’t just transfer balances from card to card. With a personal loan, you can combine all your balances into one payment, eliminating multiple credit card payments a month. Best of all, the interest rates on personal loans are typically lower than those charged for credit card balances.
If You Have High-Interest Debts
High-interest debts, such as payday loans and tax refund anticipation loans, can quickly become unmanageable. When you’re paying off high-interest debts like payday loans, it’s smart to consider getting a personal loan of the same amount of money. A personal loan is generally cheaper than most other types of loans, and interest rates are fixed.
If You’re Financing Big Purchases
The ideal time to take a personal loan is when you have a need for a lot of money all at once or if you want to reduce your monthly payments on existing debts. This may be the case when you’re purchasing a car, moving into a new home, or financing renovations to an existing home.
If You Need to Fund a Major Life Event
These days, more and more people are turning to finance for major events like a bar or bat mitzvah, a major milestone anniversary party, or a wedding. When you take out a personal loan, rather than using a credit card to pay for all those expenses, you can do two good things—lower the total amount of interest you have to pay over the life of your loan and consolidate your debt into one manageable package. In addition, personal loans offer fixed rates that may be lower than credit cards rates.