Let’s start with what is a loan? A loan is borrowed money from a bank or other credit provider that can be used for large purchases or to help get out of financial hardship.
These loans are paid back month to month over some time, depending on the size of the loan. It might not seem like a smart idea to take a personal loan for personal reasons, but it can be very helpful in certain circumstances.
Here are six good reasons to apply for a loan.
- Consolidate debt
To consolidate your debt is one of the most common reasons for taking out a personal loan. Having multiple loans and credit cards that all have different interest rates, balances, and due dates can be quite confusing and be very daunting. This is where a personal loan can help.
When you apply for a loan for debt consolidation, you combine all of those little loans into one big loan. With one due date and one interest rate, this can also bring down the total that you have to pay per month as certain credit providers would give you a discount for paying up the debt all at once.
- Payday loan
This kind of loan can be very dangerous, as you have to pay back the entire amount on your next payday. These loans are mainly for just filling a gap that you need, and should be paid back on your next payday.
A consultant at My Canada Payday suggests that you should be sure that you can pay back the loan before going for a payday loan. Although they might carry some risk, it has its own big advantage as you won’t be stuck with a lengthy payback process over many months or years.
- Finance home remodeling
Home remodeling can be quite expensive and not everyone has the money saved up to pay for big expenses like that, this is where a loan can be very helpful. Remodeling your home can bring up its value; this is what makes this kind of expense worth to take out a loan.
This might be useful to do when you are selling your home, to get it fixed up and remodeled before you sell, as this can boost the sale price of your home and you can pay off your loan faster. So, whether you just want a new look to your home or need to do it to drive up the selling price, a loan might be the best way to do it.
- Money for moving expenses
You won’t need a loan if you are just moving down the street or to a new neighborhood. But moving cities, or states or even countries, can get very expensive very fast, and you don’t always know if you have the capital to finance such a move.
A loan can help you pay for the transport of your belongings and might be a big help in settling down in your new environment. But before you take up a loan for the big move, work out if your new income will be sufficient for you to pay off the loan balance
- Making a large purchase
Disaster can strike at any moment, and one of your big household appliances might have given up. Buying a new washing machine, fridge or stove can be a big expense and not everyone has that kind of money in the bank.
This is where a loan can come in very handy – instead of waiting months to save up to buy it, or going for a cheaper inferior product because you don’t have the capital to afford the better product. And even though the loan might incur some loan fees and interest, in the long run, that might be cheaper than using laundromats and similar services.