About 80% of millennials are currently in some kind of debt.
When you’re facing a financial crisis, we know that the idea of taking on even more of it to make ends meet can feel terrifying. However, when an unexpected event hits, many people turn to lenders in order to get through tough times.
If you’re asking yourself, “Should I get a personal loan?” then you’re already on the right track. Taking out any kind of a loan isn’t a decision that you should make lightly.
But the truth is that some loans are much better than others.
In this post, we’ll tell you why applying for a personal loan may be the very best thing for you.
Then, we’ll fill you in on what to look for to ensure you make the right decision.
1. Freedom Regarding Use of Funds
Perhaps the best thing about personal loans is that there’s a nice sense of flexibility when it comes to how you use the money.
No matter what sort of a financial difficulty you’re facing right now, as long as you can make your payments, you can likely use a personal loan to fund it.
While it’s important to be prudent and practical about what is and is not a good reason to take out a loan, the freedom of choice you have here is appealing.
You can use the money to consolidate your debt, to ensure you can make your car payments, and in some cases, even pay the mortgage on your house.
You can use it to finance your wedding, cover unexpected medical bills, and even to manage the costs of a funeral.
Be aware that in most cases, you can’t take out multiple personal loans at once.
So, whatever you’re spending the money on, make sure you do so wisely.
2. Lower Interest Rates Than Credit Cards
So many people get sucked into the cycle of debt that can come as a result of an over-reliance on credit cards.
Lots of borrowers simply aren’t aware that often, personal loans actually have lower interest rates than credit cards do.
So, before you consider putting a few thousand dollars on a credit card, take a look at some lenders’ options instead.
3. They’ll Help You Manage Your Spending
Another benefit of applying for personal loans?
It might sound counterintuitive at first, but the truth is that they often help people to get a better handle on their spending.
Think about it. When you use a credit card, or really any form of plastic, it can be so easy to overspend. Sure, you have a credit limit, but you can always have that bumped up. Yes, your checking account balance might be low, but you can always rely on your savings.
Before you know it, you’ve spent far more than you needed to — and way more than is financially prudent.
Personal loans offer you a finite amount that you can spend. Once the money from the loan is gone, it’s gone — you can’t magically increase the loan amount.
It’s more like paying with cash than buying on credit.
Plus, paying back your loan will force you to take a hard look at your current budget. You’ll eliminate unnecessary spending, find yourself saving more and improve your entire financial literacy as a result.
4. They Can Strengthen Your Credit Score
Are personal loans worth it?
In most cases, the answer is yes — in no small part because they can help you to either repair or establish your credit score.
This is because loans allow you to prove to lenders that you can make payments on your loan in a timely manner. This means that you’ll be much more likely to be approved for more loans or credit cards in the future.
Now, let’s talk about how you can choose the right personal loan for your needs.
“Should I Get a Personal Loan?” What to Look For
Now that you know about a few of the many benefits of the best personal loans, let’s talk about what you should consider when applying for one.
First of all, never borrow more money than you can afford to pay back by the time the loan term ends.
Speaking of loan terms, consider how long you want this loan hanging over your head. Yes, a longer loan might mean smaller payments each month, but that means you’ll pay more interest. In general, aim for the shortest term you can handle.
Also, look at the potential interest rates of the loan. Never be afraid to get multiple offers, and to use lower interest rates you’ve been offered as a bargaining tool!
Also, make sure you’re aware of any potential early repayment penalties, fees, and other “hidden” costs that might be associated with the loan.
You can find out more about what to look for when applying for a personal loan on this page.
Personal Loans Are a Better Option Than You Think
We hope this post has helped you to understand that, as long as you focus on responsible borrowing, personal loans are often a great way to make it through a financial roadblock.
Now, you’re ready to answer the question, “Should I get a personal loan?” with a resounding, “Yes!”
Maybe you’ve been inspired to makeover the rest of your financial life.
We can help you with that.
Keep checking back with us for more money-saving tips and financial advice — and learn about the best products to spend your money on.