Consider a Personal Loan
Personal loan is a boon for many, especially during emergency situations because you get the required money instantly without much hassle. It lets you finance anything you wish for, from buying a new TV to paying for a home renovation project. However, just because you can easily qualify for a personal loan, it does not mean you should sign the paper without a thought. If you need to borrow, think about your options because there could be better options than a personal loan. Sometimes, it is better to postpone a purchase, save the money required and then buy it after a few months instead of drowning yourself in debt. Here are some instances when you should not use personal loans to solve the money problem.
Paying college fees or refinancing student debt: Personal loan is not the ideal choice for paying the college fees because federal and private student loans offer much more benefits and flexibility than personal loans. Federal student loans don’t check your credit score and the loan interest is tax deductible. The interest rate is also lower than personal loans. Similarly, private student debt refinancing offers a lower rate of interest and despite the refinancing, you get tax benefits.
Consolidation of small debts: This is probably the most popular usage of personal loans. You consolidate all your debts and take a personal loan to repay the lenders. Debt consolidation ensures a lower rate of interest and makes the money management a lot simpler. If you are thinking about taking a personal loan, then get in touch with libertylending.com. However, the problem is not everyone can save money by consolidating credit card debts with the help of a personal loan. Even if you can save money, it is quite possible that the saving is so minuscule that it does not justify the hassles of debt consolidation. You feel happy seeing the low rate advertised by the lender, but you may qualify for a rate that is much higher than advertised because the ads generally say “rates are as low as” and that means there is no guarantee of you getting the lowest APR. Also, when you consolidate credit card debts with a personal loan, you must take into account the origination fees and other costs mentioned in the documents.
Car purchase: There are plenty of car loan companies out there in the market and thus, it is not necessary to apply for a personal loan to buy your dream car. Auto loan is a secured debt. Thus, if you fail to make the monthly payments, the financer can possess your car and sell it to recover his money. Due to this collateral factor, the rate of auto loans is cheaper compared to personal loans. According to a survey done in 2017, the average car loan APR is 4.24% while the APR of a personal loan is 10.13%.
Pay for a vacation: According to a recent survey 74% Americans have said that they borrowed money to pay for a vacation. Vacation happens once in a year and thus, it can be planned throughout the year. It is not an emergency. If you are applying for a personal loan just so that you can visit your dream destination, then it is a stupid mistake and proves that you can’t afford the vacation. Besides, the interest charges of the loan will add to your vacation cost and make in an expensive affair.
When you think about applying for a personal loan, consider your goal carefully. In case of an emergency such as medical expenses or immediate house repair, personal loans are useful. Make sure it will help you financially in the long run, instead of putting an additional burden.