Personal loans can be a fantastic thing to have and depending on your circumstances, they can really change how your financial situation looks. The question you have to ask yourself though is, is a personal loan for me – and if so, what are the benefits of applying for a personal loan and getting one? Luckily, CreditNinja.com has come up with a helpful guide to the benefits of a personal loan here!
Benefit One: It Can Boost Your Credit
If you’re a responsible borrower and you’re savvy with your finances, getting a personal loan can boost your credit score through your punctual and frequent repayments. As your payment history accounts for around 35% of your overall credit score, it’s no surprise that if you take out a personal loan for a while – consistent repayments will send your credit score right up. Of course, it’s important to note here that if you’re not reliable with your repayments and you miss a payment – it can have a horribly detrimental effect on your credit score, so think carefully before taking out a personal loan!
Benefit Two: It Enables Borrowers Opportunities
If there is something that you really need or want and you don’t have the financial means to purchase it – a personal loan is a great way to get what you want and need without having to wait! Personal loans that you can repay in installments can allow you the flexibility to make repayments of a large financial commitment over a few years without the need to pay a massive sum of money straight away.
Sometimes, we need to take out a personal loan for these sorts of purchases. Perhaps you desperately need to make house repairs, maybe you’re getting married or maybe you need to fund a funeral – whatever the case, the money is needed as soon as possible and you don’t have time to save up for it!
Benefit Three: It Allows People The Ability To Consolidate Their Debts
For many people, debts become less and less manageable. Maybe you’ve had several credit cards and racked up some debts – maybe you’ve had a bad time recently and the debts have gotten worse and worse. The one way you can get yourself back on a financial track is by taking out a debt consolidation loan. This way, you can clear your debts that possibly have a high interest rate and simply have one easy to make payment each month for a number of years.
This way, your debts are cleared, you’ve now got payments in one place rather than in several places, you’re saving money from extortionate interest rates and you can even have a boost in credit from this! You’re making regular installment payments and you’ve no longer got credit cards with a wild credit utilization ratio. Remember though, if you use your credit cards after clearing them – it’s easy to slip into further debt, so be careful if you’re considering a debt consolidation loan to clear these sorts of debts.
Benefit Four: Flexibility
Personal loans generally are between $1,000 and $100,000. Getting larger amounts of money is quite difficult with other borrowing options and this type of lending is always a good idea for long-term solutions.
If your credit score is good, you can likely find a lender that will provide you with the loan you’re looking for. The correct amount of money you’re hoping to borrow with a favorable term length, favorable monthly installment amounts and favorable interest rates.
However, this can be the opposite if your credit score is poor. It’s always a good idea to check your credit score and see if you’re eligible for certain personal loans before you apply – remember, you’ll be taking out a long-term financial commitment, so you’ll want to be sure that you can commit to a few years of regular payments. So, consider your job security and if you have the means to cover your repayments if things go awry.
What To Remember
Personal loans have a whole host of potential benefits, but much like any borrowing option – there are risks involved. Think carefully before you apply for a personal loan and consider what you need the money for.
If you’re hoping for a short term solution, other borrowing options might be better for you – such as a credit card or overdraft facility. Failure to make repayments on any money borrowed from a lender can plunge you into debt and a bad credit score – so be savvy!