Personal Loans give you fast and easy access to cash. They can be either secured or unsecured but are mostly unsecured. Unsecured means they do not require collateral before they can be collected.
The application process to receive a personal loan is easy and straightforward and unlike loans collected from commercial banks, you can do whatever it is you like with it. It is a valuable financial tool but when personal loans are not handled properly, they can be a real pain to your finances. So when does it make sense to take a personal loan?
When you need fast cash urgently
Unexpected emergencies happen that we do not prepare for. These events can throw us off balance especially financially. Personal loans are a great tool to providing you fast and easy access to a relatively large sum of money.
Imagine a medical emergency suddenly came up or you need to pay your kids school fees as soon as possible and you urgently need cash. It would make sense to apply for a personal loan in this case.
When you need more time to pay off
Personal repayments are usually flexible and spaced out. Also, they generally have lower interest rates than other kinds of loan. This gives you enough time to repay the loan in a way that does not put pressure on your finances or weigh you down emotionally.
When you want to consolidate your debts
At first glance it may not seem sensible to use a loan to pay off a loan. It might sound like you are sinking further into debts. On the contrary, it is sensible to use ‘Loan A’ to pay off ‘Loan B’ especially if the interest rate on ‘Loan A’ is smaller than ‘Loan B’.
For example, when you’re approved for a loan consolidation, you can use a single personal loan to pay off all your other debts. That way you’re repaying only one loan. This is especially useful if you do not know how to manage multiple loan repayments.
Personal loans can be very valuable financial tools. They should be handled responsibly though to ensure it doesn’t become a pain to your finances.
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