In a perfect utopian world, everyone would always have the money to meet their needs and fulfill their dreams. The reality, however, is a little different. More often than not, to meet our life goals or emergencies, we end up borrowing money. While there are umpteen types of loans in the market, a personal loan is often considered to be a shot in the arm to your financial situation.
Personal loans are usually easy and fast to secure which makes them perfect for emergencies. The process is even easier nowadays with the ease of applying for personal loans online. If you are reading this, you are probably thinking about getting a loan right now or in the near future. In this article, we will go over the benefits of personal loans, when to apply for them and what traps to watch out for.
Personal Loans are not for Splurging
Let’s get this out of the way first. While you can use the money secured via a personal loan in any way you want, the primary objective of a personal loan is to achieve something meaningful with it. It could be for a family emergency, home improvement, your marriage, your son’s college, an emergency loan repayment or a vacation you could not afford otherwise. But it is not for shopping, splurging on fancy cars or the fine life. Most importantly, personal loans should never be used for investment purposes. Borrowing money to invest is a cardinal sin in terms of financial security.
Some Benefits of Personal Loan
- Manage Your Debtors: If you have many debtors, each of whom you have to pay separately at separate time and at separate interest rates, things can get overwhelming sometimes. A personal loan can aid you in paying most or all of them off in one fell swoop and then you only have to worry about a single debtor.
- Health Emergencies: A disease-free household is a dream that is tough to achieve. More often than not, nasty diseases knock on our doors and fighting them can drain your finances pretty fast. A quick personal loan can keep your finances secure while you take the best care of your loved ones.
- Substituting High Interest Loans: We are not all finance savvy and mistakes can be made when securing a loan. If in the past you have fallen into the trap of securing a high-interest rate loan and are still paying the penalty, paying it off with a low-cost loan could improve your finances tremendously.
- Improve Your Credit Rating: Late payments, defaults and other contingencies can seriously hit your credit rating. By securing a personal loan you can boost your credit score in two different ways. First, you can pay off certain debts that have been plaguing you for a long time. Secondly, paying the personal loan off in a timely manner will reflect nicely on your credit rating.
Now that we have established the best reasons why you might want to go for a personal loan, let’s take a look at the some of the known pitfalls that most people fail to avoid.
- Take Your Time to Research: There are uncountable personal loan providing companies online and offline, each offering the seemingly best rates and ease of disbursement. But only through proper research you will be able to separate the gem from the coal. If you take your time, you should be able to find the best low-cost and easily secured personal loan out there.
- Read the Fine Print: Many lenders are notorious for introducing hidden terms and conditions that are stacked against the borrower. You may get unnecessary charges added, lower than expected disbursement and higher interest rates than agreed. All of it is in the fine print. If you are not conversant with financial lexicon (who is), take the help of an advisor and go for a reputed lending firm with a solid track record or take advantage of the fact that we are living in the digital era and apply to get your personal loans online.
- Keep Your Loved Ones Notified: Taking a personal loan is a major financial undertaking. It is imperative not to keep your family and close friends in the dark when going for one. Not only will they help with their perspectives, but also they may share their own personal experiences and good online personal loan lenders that they have used previously. This can save you time and a lot of pain.
- Don’t Jump the Gun: In today’s internet driven world, each of us is bombarded daily with SMS’s, emails and other forms of advertisement telling us how easy it is to get a personal loan. They come with hundreds of loan options and thousands of ideas on how to use it. At times, you may also feel tempted to go for that “paperless, pre-approved, disbursed within minutes, lowest EMI” loan that could make your desires come true. But before you take the decision, step back, take a deep breath and think over. More often than not, you will convince yourself within minutes that you do not need a personal loan at that point.
This is just a basic understanding about personal loans to get you on the right track. Remember that if a personal loan is secured at the right time and used wisely, it can be the greatest financial tool you have ever wielded. But if spent frivolously, it might turn into your biggest liability ever. Do not be afraid to apply for a personal loan when needed. Just go for a reputed online lender and leave your financial worries behind.