Personal loans are a popular option for people who are looking to get a small amount of loan with easy repayment terms. With a variety of other loans available for users, there are only a few that fall easy on borrowers. A personal loan is one of these options.
Due to its ease of repayment and low-interest rate, a personal loan is a top priority for borrowers looking to buy a home. Understanding the circumstances in which a personal loan becomes a highly beneficial choice can help borrowers make informed decisions.
In this context, we have jotted down the top 4 reasons you might need to avail a personal loan.
1. Average Credit Scores
Personal loans are one of the only types of loans that can be attained with low to average credit scores. As mentioned above, you can even take a personal loan with a credit score as low as 580. If your credit score is higher than this, you will get benefits in terms of interest rate and monthly installments.
This flexibility is beneficial for people who might otherwise struggle to qualify for conventional loans due to credit issues. However, you will need to choose the right lender to provide you with a personal loan that best suits your needs.
If you are taking out a personal loan for the first time and don’t know which protocols to follow and what to expect, you can read a comprehensive guide on personal loans for beginners to have a clear idea of what you are going to pursue.
2. Debt Consolidation
One of the main reasons people prefer taking out a personal loan is for debt consolidation. Debt consolidation means taking out a new debt to pay off your other debts. The debt taken out is usually low-interest debt that can pay off your high-interest debt.
This grouping of debts will make it easier for you to pay off your debt in a specific timeframe, and that too with perfect ease. One of the benefits of utilizing a personal loan to pay off credit cards or other types of debt is that the interest rates are usually lower.
For example, personal loans offer interest rates of around 11%, while the percentage of interest rate on credit cards is about 21%. With this lower rate, you will be able to pay off all the other loans and save you money in the long-term.
3. Home Improvement Projects
If you are a homeowner looking to renovate your home, you can use a personal loan in this regard. This loan will be helpful for you in managing necessary repairs, like plumbing and electrical upgrades. Personal loans in this regard are especially helpful for people who don’t have savings or don’t want to get a home equity loan.
Also, unlike other home equity loans, a personal loan does not require you to use your home as collateral. The funding times for these loans are quicker, which makes it easy for small renovation projects and other short-term projects in your home.
4. Vehicle Financing
A personal loan is a great way to cover the cost of a car or any other type of vehicle. This loan can be a great way to pay for a vehicle if you are not buying it directly from the company itself.
For example, if you are buying a used car from another consumer who has already used it, a personal loan will help you purchase that car without disturbing your savings account. As mentioned above, these loans are unsecured, so your vehicle won’t serve as collateral.
This will allow you to keep your savings with you while owning the title of the vehicle right away.
