Good reasons when you should consider getting a personal loan

November 19, 2019 (Investorideas.com Newswire) Credit of any type is always a double-edged sword. On one hand, it helps you to deal with a personal emergency, a medical bill, an installment that you can't afford, a sudden financial loss etc. paying it back is a somewhat long process that makes a dent in your finances regularly.

Personal loans are some of the most popular type of loans. They are the best option in a number of circumstances. But first, let's clear some confusion around what is considered a personal loan. Homes are purchased with the help of mortgage loans, cars have auto loans, students pay for tuition with student loans etc.

The great thing about personal loans is that they are 'personal'. They can be used for just about anything. Many lenders and banks will ask you what you intend to do with the money, but as long as you are borrowing it for a legitimate reason, you have nothing to worry about.

However, there is no collateral with personal loans. That is in the case of home loans, your home is the collateral and with the auto loans, it is your car. This is why personal loans are called 'unsecured' and probably have a higher interest rate.

These are some really good reasons when you should consider getting a personal loan:

1. When you wish to consolidate credit cards

Often you end up with more than one credit cards that are charged to their limit, In such a case, it is advisable to get a personal loan to consolidate the charges into a single monthly payment. Think about it, the interest rate on the loan could even be lower than the annual percentage rate of your cards combined.

2. Student loans

Many students in the Philippines take personal loans to refinance their student loans and get a financial breather. One argument in favour of doing this is that the interest rates are probably lower than the student loan interest rate. This means you can potentially pay off the loan faster. However, you may need to take financial advice before taking this decision.

3. An important purchase

Have you ever itched to make a big financial purchase or expenditure that simply can't wait. Be it a new appliance or house repairs or something personal. Before financing a purchase with a personal loan, ensure it is a need and not simply a desire. Compare personal loan interest rates with the financing options at the seller. Consider a couple of quotes before you make the decision to opt for a personal loan. In fact, check personal loans options online as you can sometimes find the best interest rates online.

4. Your dream wedding

A large event such a wedding has insurmountable costs. For most people it is a once-in-a-lifetime event and it is sensible to fund your dream wedding by financing the whole or part of it with a personal loan. You can save a considerable amount on interest rates, if the personal loan interest rates are lower than your credit card.

5. A holiday

A holiday on your 30th birthday was part of your bucket list. Don't ditch that idea yet just because you don't have the funds and  your credit cards are maxed. It is a special occasion and it demands some indulgence. Costs for luxurious vacations are high, but nothing worth having comes cheap or easy. This is an exception to the 'desire and want' rule when it comes to personal loans.

6. Unforeseen emergencies

When life gives you lemons, sometimes you need to take a personal loan. If there are emergencies that you hadn't budgeted for, taking a personal loan can help you tide over the tough times and you can easily pay it back at your convenience. The great thing about personal loans is that they are largely flexible as far as the use of funds is concerned.

7. Medical bills

Many times your PhilHealth coverage is not enough to cover the procedure you require. It is definitely an anxious time when there is a medical emergency for you or your loved one. This is an ideal use case for a personal loan. You can use the cash to pay for x-rays, tests, surgery, anesthesia or even your hospital stay. Personal loans are also being used for cosmetic surgeries that are typically not covered by insurance companies.

Conclusion

Taking out a personal loan in the Philippines is not unusual. But you really need to consider if it is a legit reason and compare all the options available to you.

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