A personal loan is an amount of money borrowed from a lender to deal with emergencies, make large purchases, or consolidate debt. Depending on your payment terms, a personal loan is paid back monthly, typically lasting 2 to 6 years.
However, your loan can stretch this period longer or cut it short depending on how diligently you make your payments. Several financial institutions provide personal loans, but they take time. Only a few financial institutions like City Finance offer same-day loan services. With that said, let’s explore the three reasons to get a personal loan.
3 Reasons to Get a Personal Loan
While it’s crucial to evaluate your financial position before taking a loan, sometimes a personal loan is just what you need to finance a large purchase you can’t afford upfront. Here’s why a personal loan is beneficial.
1. Debt Consolidation
Debt consolidation is one of the most common reasons for borrowing money. You consolidate all other loans under one monthly payment when you apply for a loan to pay off your other debts. As a result, paying off loans becomes easier because you have to make a one-time payment per month instead of cutting your monthly budget every week.
2. Car Financing
If you can’t afford an upfront payment, you can apply for a car financing loan. You won’t have to ask for money from your friends and family, plus you can sell your car later and make a balloon payment to clear your outstanding debt. Add your savings in the remaining amount after selling the car, and you can buy a new one without any loans.
3. Wedding Expenses
Weddings are getting expensive. According to The Knot, an average wedding costs USD 28,000 or AUD 38,000. Most people apply for a personal loan to finance their dream wedding. After all, your wedding day is a special day, and you want to leave no stone unturned to make it one to remember !
Personal loans are a form of debt you accumulate to finance your expenses. Most things in life are expensive and require an upfront payment. If you have enough monthly finances to pay off your loan, you can comfortably request a personal finance loan. Plus, the interest rate for personal loans is usually lower than credit cards if you have a good credit score.
Of course, you should weigh the pros and cons of taking a personal loan because you are accumulating debt. However, if you have the finances to pay off a personal loan comfortably, getting a loan will be in your favour. You can also get a personal loan and use it to make some investments. When your investment makes a profit, you would have probably paid off a large sum of the loan.