Taking out a loan or using your credit card to pay for an unnecessary item or service you cannot afford to pay for with cash outright rarely makes financial sense. However, there are instances when applying for a personal loan is necessary.
Here are a few examples of the practical uses of a personal loan:
Making payments to different creditors can be tricky. Each creditor, whether it is a bank, credit union, mortgage company, or a different type of financial institution, will impose their own interest rates. Plus, each debt will have a different due date and required monthly payments.
With these factors in mind, it is easy to feel lost, confused, and overwhelmed. As a result, you may end up missing payments or sending late payments. This, in turn, will lead you to incur additional charges which can increase the amount and length of time you need to pay.
By applying for a personal loan, you can use the funds to pay for your debts and have them consolidated in one account. The Standard Chartered Debt Consolidation Personal Loan is one such product. By bringing in all your debts under one roof, you only need to worry about making one set of payments, one interest rate, and one due date.
Debt consolidation is one way to get yourself out of credit card debt or multiple sources of debt. If you are in a financial rut, a personal loan can be your ticket to freedom.
Credit card payments
Credit cards make paying for items or services quick, easy, and convenient. In some cases, they are considered safer to carry than wads of cash. You can use your credit card to buy food, pay for your kid’s tuition fee, buy equipment for your small business, and so much more.
However, the perks they provide come at a steep price. Credit card providers are notorious for their high interest rates. When you don’t pay your credit card debt or only pay the minimum, you could end up paying for your debts for several years.
Compared to credit cards, personal loans have smaller interest rates. By taking out a loan to pay off your credit card debt, you have a better chance of paying your debts quicker.
Milestones and emergencies
There are several milestones that require large investments. Some of the more significant ones include debutante parties for women, weddings, births, and funerals, among others.
At times, your savings may not be enough to cover the expenses. Instead of paying by credit card, taking out a personal loan may be considered a more practical option.
Life is also filled with events that are never planned for. Accidents, disease and other medical emergencies can also drain your savings. If you are unable to pay for your medical expenses with cash, you can take out a personal loan to pay for surgery or other costly treatments.
Perhaps your home is no longer enough for the needs of your growing family or you’re in dire need of a new vehicle. A personal loan can be used to cover some of the renovation costs of your home or afford you the chance to get a new car.
Instead of spending months or years saving up, you can use your personal loan to purchase appliances or furniture for your home remodel as well.
Cars, on the other hand, require a significant investment as well, whether you are buying a new unit or a pre-owned one. You will also need to take into account maintenance fees. In the event that your vehicle breaks down, the funds from the personal loan you took can also be used to pay for the repair and replacement of expensive components.
Personal loans are not just limited to the private needs of the individual or the applicant’s family. They can also be used to pay for the running of a business such as paying for salaries, inventory, or even equipment when cash is a bit low.
Make money work for you
It is not uncommon for a person to be in debt or not have enough cash on hand at certain points in life. Applying for a personal loan provides applicants ready access to cash. The requirements are less stringent as compared to other types of loans, making it easier for a personal loan to get approved.
Compared to credit cards, interest rates are also lower. Combined with more flexible payment terms, paying back a personal loan is easier than paying back credit card debt.
If you are in dire need of cash to pay off your debts or make major purchases, consider applying for a personal loan. Just make sure you use it for something important or absolutely necessary.
Deepak Kumar is a Co-Founder of SoulWallet, a neutral comparison portal for consumer financial services. With a team of “out of the box” thinkers and a deep understanding of the UAE consumer banking industry, the company helps customers make the best choices when shopping for financial products such as credit cards and loans.