Taking out a personal loan is considered as a smart financial move when you are in need of funds. Because they often help you to pay for unexpected expenses. It can be said that they are new-age friends during troubled times. When stuck in an emergency, we start exploring all the financial options to choose the best one according to our needs and requirements. Many lenders and credit providers have made these loans easily available so that people can gain quick access to funds when they need it. There are plenty of reasons to take out a Personal Loan and there are several advantages to it as well. Five top reasons to consider taking out a personal loan are listed in this article.
5 Reasons to Get a Personal Loan
Consolidate your debts
If you have multiple debts that you are fiddling with, then it is high time you must consider taking care of your debts in a convenient manner. Suppose say, you have outstanding credit card bills or other unpaid loans that need quick repayment – then you can use this loan to merge everything you owe into one. So, basically, you have to make one single repayment against all the loans that you have. This is a good way to save some money as you do not have to pay different rates of interest for each loan. A single-interest rate loan is what you have to pay.
No collateral needed
Unlike secured loans, you do not have to put up any of your valuables such as your car, your home, or your personal property as security while availing an Unsecured Personal Loan. Your property or valuables will not be possessed if you fail to meet the repayments. But please bear in mind that your credit score is at stake and will be ruined if you do not make the repayments on time and in full. Therefore, before taking out a loan, make sure that you have a solid financial plan to meet all of the repayments, without any fail to protect and boost your credit score.
Borrow more as compared to a credit card
A credit card is a revolving line of credit that allows you to use the amount that is pre-set by the bank or the financial institution. With a personal loan, you can borrow an amount ranging from £1,000 to £35,000 – depending upon your financial circumstances and credit rating. Banks generally do not up the maximum limit as a credit card is an unsecured form of borrowing. But with a personal loan, you have the potential to borrow more as compared to your credit card.
Predictable repayment schedule
When you borrow a loan, you will know how much you have to pay every month towards it if you have taken out a loan with a fixed rate of interest. You will know the payment due date and the amount beforehand and this will help you organise your regular expenses in a smooth manner. You will be able to draft a budget taking into consideration the repayments. And once you have prepared a budget, you will know how much amount you are spending and on what.
No guarantor required
A guarantor is a person who can be held responsible legally to pay off the loan if you default on the repayments. That means he will be liable to pay off the loan if you fail to do so. Therefore, it becomes difficult to find someone who is willing to take the risk on behalf of you. Many lenders offer personal loans with no guarantor, which means you do not need to nominate someone to co-sign the loan application with you. Save yourself the sweat to find someone who will vouch for you, instead become your own guarantor while borrowing a loan.
Is a Personal Loan Right for You?
A personal loan can prove to be a beneficial tool for you if you manage it responsibly. Become a responsible borrower by opting for a loan amount that you know you can easily afford to repay. If you can repay the loan on time, it will be better for your financial future as well. Make a budget and stick to it unless and until you pay off your debt. And if you have an emergency fund, tap onto it rather than opting for a loan. If you are sceptical about the repayments, it is better to ask your friends, family and relatives for monetary help. Opt for a loan when all the possible source of funding have been exhausted without much success.
The Bottom Line
Opting for a personal loan can yield desired results but remember, you have to make the repayments. Before choosing a loan, make sure you compare and weigh your options to find and avail the best one that will suit your requirements and may help you save money. Compare the loans and include the rate of interest and the Annual Percentage Rate (APR) – that will help you determine the overall cost of borrowing. Review the eligibility criteria of the lender you are intending to deal with to know whether you fit into their eligibility box and prepare the documents that may be needed by the lender. Whenever you are searching for a loan, deal with a lender or credit broker who are authorised by the financial watchdog – the Financial Conduct Authority (FCA) to avoid entering into any kind of scam.
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