Considering personal loans can sometimes be a frustrating experience, especially when you are indecisive about them. As much as it promptly fulfils our financial needs, we also have to consider lots of factors that go into it, lest we find ourselves wringing our hands about. We cannot possibly be hasty in going for it, as it is a loan after all.
Here are some points to consider that help determine whether a personal loan is right for you.
Know what it is and how it works
A personal loan is an amount of money that you usually borrow from a bank or other such equivalent agency and repay in fixed instalments being inclusive of an interest rate over a period of time. What makes it different from the conventional loan is that you don’t have to put some collateral at stake, as long as you qualify for the criteria of creditworthiness corresponding with the amount you are taking as the loan. Owing to this, there are always some application processes and lots of paperwork to be sorted before receiving the sum. This can be remedied by several third-party services that help with a personal loan application. And if you are under the right circumstances then you should definitely go for one.
What it can do for you
A personal loan can help you with lots of things since you can source out a large amount in a one go. It can pay your university fees, your daughters’ marriage, help you construct a house, buy a car or overcome an uncalled-for medical expense, all the things that might not be possible with the withdrawal of savings from your monthly salary or income. One of the most cited reasons for the applications of personal loans has been that of debt consolidation, wherein an individual takes a large sum as debt to pay off his smaller debts. A personal loan is thus an ideal solution for such a situation since you end by making up for large amounts of your debts vis-à-vis still a larger amount taken as a loan, all the while paying all of it back in smaller chunks. In the same vein, it can be taken to counterattack your credit card debt.
Now that you know it – do you really need it?
An obvious inquiry for sure, but a thought-provoking nonetheless. The question ‘do you really need a personal loan?’ must have crossed a lot of times in your mind. But, really, if you have finally decided to go out of your way to take a personal loan, please take a breather, and think things through. It’s easy to get swayed by the idea of immediate relief to whatever quandary you are facing at the time or the desire that’s been just too tempting to keep in check. This is not to undermine the purpose of personal loans since it can definitely be a boon for our financial disproportion, but at the same, know that it is not the only solution, however feasible it might seem. For instance, the loan you are taking for a house that needs repairing or car that needs to be gifted can be forestalled in favour of any interest-free financial help that you might get from your friends or family or even from your own bank account, provided you have patience and means to accumulate the desired amount. That being said, if all of the mentioned ways are out of the question and your situation is far more stringent, then a personal loan is the solution you need after all.
How well you handle debt?
For all the benefits personal loan and your manifest need for it, you also have to consider your history of handling debt. If you are a person who has a hard time doing that then a personal loan is definitely not the step you should be taking. It’s an interesting paradox because a personal loan can have both positive and negative effects on your credit score, depending on how you repay it. That is to say, if you make timely payments for the debt you have taken then the personal loan will boost your credit score, which is always a good thing for your future purchases. However, if you fall short of that, then it will weaken it. Your ability to handle your debt will ultimately define if personal is the right choice for you in the long term.
Always be aware of what you are in for
While the fundamental mechanics of personal loans reveal its basic rules and regulations, you’ll have to be aware of terms and conditions that are oftentimes imposed by your loan provider. Some of them will charge you an origination fee, which, however being 4-5% of the sum, is nevertheless directly proportional to the amount you borrow. Also, not all terms and conditions are spelled out, as some are taken for granted as a general rule. For instance, if the debt from a personal loan is on your radar, then credit agencies will deny you another loan that you might need, at some point, to take. Ironically, oftentimes a bank will charge you a prepayment penalty if you end up paying back your debt sooner than the decided time. This is done to make up for the interest your loan provider has in perspective.
Are you the right person?
This self-reflexive question, however mild, is instrumental in determining if a personal loan is right for you. That is to say, whether you are the person who can go through all the tumultuous process. Can you take the psychological abuse that comes with debt, provided you are prone to it? In other words, it’s time to sit and reflect back on your both financial and psychological stability. Too often people take a personal loan and then end up being regretful for their actions because they didn’t take account of everything posed before them. Yes, I am referring to the potential scams that take place in place of personal loan providers. Therefore, if you think you are of a gullible disposition and cannot properly grasp the nooks and crannies of your personal loan plan, then considering help from a friend or even a professional would be a good idea. For after all, even as we need a personal loan, we are not always equipped with the right means to get one.
Conclusion
For all its pros and cons, a personal loan has become a mixed bag for potential borrowers. Conceptually, it is a great source to make the most of, since how well it integrates with your financial ups and downs, owing to the fact that it comes with relatively low-interest rates. However, if you are confused about opting for one then the above-given points are really something you need to take into consideration.
MORE INFORMATION ON THIS TOPIC –
https://www.supermoney.com/best/personal-loans/
