There are many reasons someone may take out a personal loan. It can range from treating yourself to a new car to consolidating debt so payments are easier to manage. You may be worrying whether a personal loan is the right decision for you. Many lenders can ask for collateral against your home or other possessions in order to agree to lending money. For some people, this is a big risk and taking out a loan should be considered thoroughly. If you're thinking about taking out a personal loan, here are some reasons why it could be a good idea.
This is often the number one reason for taking out a loan and it can make good financial sense for many people. For example, you could be repaying other loans with a higher interest rate, but by consolidating your debt into one larger one with a lower rate, you'll be paying much less back. One payment per month is often much easier to manage than a few. Getting a loan with a fixed rate will allow you to plan the amount of money coming out of your account each month and stay on top of your payments. Take a look at our guide on using a personal loan to reduce interest
Settling a Credit Card
The frustrating thing about credit cards is that you don't really make a dent in your balance if you only pay the minimum repayment each month. It often be better to take out a personal loan, pay off the credit card and close the account. You'll often be paying less per month with a loan and it will take you less time to settle the account. This way, you're forced to pay off the money and you see a significant reduction each month, instead of just paying the interest on a credit card but seeing no difference in your balance.
This is the number one reason for people to secure a personal loan for something other than debt. Unexpected things happen in the home all the time. Perhaps you've unintentionally made a dent in your wooden floor or your carpet is old and needs replacing. For many people, home improvements like, conservatories or kitchen extensions add a lot of value to the property. Getting a personal loan for home improvements is often seen as an investment, rather than an expenditure. Therefore, home improvement loans often pay for themselves.
Car or Vehicle
There aren't many people who can go without a personal form of transport these days. Whether you're using it for the commute to work or you're the family taxi driver, a vehicle comes in handy. It can also make life very difficult when something goes wrong with your vehicle. A personal loan can be taken out to purchase a new vehicle or make repairs on an existing vehicle. For many people, this kind of loan is seen as a necessity, rather than something just for fun. Just remember, if you do pay for your car using finance, in some cases it won't officially be yours until the loan is paid off.
A holiday isn't an essential purchase, but when you've been working hard all year long, it's surely well-deserved. If you're ready to take your family on the holiday of a lifetime, you may need a little financial help to pay it all off. It's certainly not advisable to do every year, but many people take a loan for special occasions, like honeymoons or anniversaries. It's important you know that you can afford the repayments before taking out a loan for a holiday on a whim.
No matter how much you try to scrimp and save, a wedding will always be an expensive occasion. There are always unexpected expenses. For example, paying the registrar to attend your venue or VAT on your flowers. Many aspects of a wedding need to be paid for ahead of the day to secure your services. You may find that you need more time to come up with the money you need and a personal loan gives you the option of paying everything at once while repaying the money in small amounts. It's often the best option for newly married couples that have a lot of bills to pay.
Moving to a New House
Even if you're moving to downsize and save money, there are many expenses involved in moving house. You'll be faced with solicitors costs, stamp duty, moving van costs and many more. You'll need to have money available to deal with any unexpected costs that will inevitably crop up. Sometimes, the best way to tackle this problem is to apply for a personal loan so you have the money in your account should you need it. If you're downsizing, you'll already have a way of repaying the loan with the money you'll save on your mortgage.
In the UK, we're lucky enough to have the majority of our medical expenses paid for us. However, there are often times when we'll need to pay for ourselves. Perhaps you have tooth ache and need to visit a dentist or your glasses have broken and you need to pay for a new pair. Of course, the NHS often comes with long waiting lines and some people opt to pay for private health care in order to be seen sooner. Getting a personal loan could mean you're feeling better much sooner, and that's often worth the repayments.
Where to Get a Personal Loan Online
- Contact your bank first. Your bank can often offer better deals to loyal customers, so you may get a better interest rate when applying.
- Use a loan comparison service. It can take a lot of time to go through every loan company individually, so let someone else do the hard work for you.
- Always check your credit rating before applying for loan. There may be things you can do to increase your score and get better interest rates from potential lenders. You can view your score by using sites like Experian.