Are you asking yourself the question: should I get a personal loan? If yes, check out our guide here explaining when it’s a good idea to get one.
From big-ticket purchases such as cars and homes to business loans and medical bills, Americans are no strangers to debt. In fact, the average adult in America has almost $40,000 in debt, and that’s excluding mortgages!
While a bit of debt is normal and usually manageable, it isn’t something you want to take on if you’re not absolutely sure it’s the right choice. Doing your research and weighing your options is important.
So if you find yourself asking, “should I get a personal loan?” you’re in the right place! Read on to learn a few of the best reasons to get a personal loan so you can decide if it’s the right route for you.
An Overview of Personal Loans
Before we get into the reasons to get a personal loan, we need to briefly go over what a personal loan is. There are many types of loans for specific purchases, such as a mortgage or an auto or student loan.
A personal loan, however, can be taken out for any use you desire, as long as your intentions are responsible and legal. But there’s a catch. Because personal loans are unsecured, meaning there is no collateral at stake, your interest rate will likely be higher than with other types of loans.
Now then, let’s dive into the reasons to get such a loan.
Improve Your Credit Score
You don’t want to get in over your head with loan debt, because making payments on time is important. But if you’re smart about the personal loan you choose, it can actually help to improve your credit!
A well-managed loan can add to your account mix and lower your credit utilization ratio, both of which are great tools to give your credit score a boost.
Finance a Large Event
If you have a large event, such a wedding, on the horizon, you may be searching for ways to finance it. While putting everything on credit cards is an option, many credit cards have higher interest rates than personal loans.
So instead of maxing out your credit cards, making it impossible to pay it all back in a month, consider taking out a personal loan. As long as the interest rate is lower, you’ll save a great deal in the long run.
As we mentioned above, credit card interest rates can be astronomical. If you’re in a large amount of credit card debt, with multiple cards, it could be in your best interest to consolidate it all into one monthly payment.
That way, instead of dealing with multiple interest payments, you only have one to worry about.
The only thing to keep in mind when going this route is that you may need to cease the use of your credit cards while you’re paying off your loan. The last thing you want is to pay off your personal loan only to realize that you’ve put yourself back in the situation you started in.
Should I Get a Personal Loan?
Taking out a loan is a big decision and one that should not be made lightly. It’s good to ask yourself, “should I get a personal loan?” and explore all of your options before making a choice.
Putting yourself in unnecessary debt or making other bad financial decisions can negatively affect you for the rest of your life. Which is why it’s important to treat your finances with the utmost care.
Be sure to take a look at our blog for further financial advice to help you live your best life and keep your debts to a minimum.