Saturday, Apr 17, 2021
Business

Is Taking a Personal Loan A Good Idea

If you have a stable income and also you have a good credit score, then you can easily opt for a personal loan Singapore as you will get a lower rate of interest than the other type of loans.

If you have a job that is unstable and do not have a good credit score, it is already said that you will get a loan if you want to, but you will get it at a higher rate of interest than the others.

It is not advisable to take a personal loan again and again after a major heavy expense as it will eventually lead to the reduction in your payment capability and will hamper your credit score which might lead to increase in your rate of interest.

When should one take a personal loan?

You can get a personal loan whenever and for whatever you want to but the only problem is that bank allot you the money but before it does that they will check your income and also your repayment ability.

Bank rarely asks the borrower for what they need the money for and in some case, if the amount is huge, then they will check the credit score as well as capability of a person to repay his debt.

Here is the reason why you should take a personal loan,

  • Consolidate your debts:- A person who does not have money to clear out the old debts that he can apply for a personal loan in which you can take the amount you want to directly from a bank or a financial institution.
  • Pay for the education:- A person can take a student loan if they want to, but the only problem is that the interest rate is higher than that of the personal loan and in a personal loan you can make the repayment in instalments while in student loan you don’t have that option.
  • Finance purchase: – This lets you take a loan according to the amount that is given, and the rate of interest is lower than usual unlike any other type of loan such as an automobile loan, SME loan, etc.
  • Medical emergency:- If an emergency occurs in the borrowers family, then he or she can take a personal loan to pay for the amount which has been given to the borrower on a bill and does not even have to worry about taking the whole amount of his saving which won’t even be enough to pay the bill.
  • Pay for the wedding:- Personal loan can cover almost all the type of expenses that occur during the wedding time in the borrowers family, and this amount is to be used anywhere the borrower wants to there is no restriction on it.
  • Vacation expense:- Personal loan can be used by the borrower to withdraw the total amount of money required and also you can even try to calculate the amount of money that is going to be used in the future.

When is applying for a personal loan a good idea?

A personal loan is suitable for most of the situation, and when you take a loan for paying a student’s school or college fee, it is known as student loan similarly if you take a car you will take automobile loan, if you buy a house you will take a mortgage loan to make the payment of your home.

You can take a personal loan for paying for anything that you want, but some lenders will ask you to tell them the reason for taking this loan as they will then decide to give you the loan in full amount or on a discounted amount.

But every personal loan is unsecured that means you don’t have to keep anything as collateral like if you take a loan for a particular reason like automobile loan you have to keep your car as collateral in case you fail to pay back the amount of loan.

Here are five circumstances in which personal loan are a good idea to take:-

  •  Consolidate credit card:-

If you have one or more than one credit card and all the amount on those cards are maxed out then you can take a personal loan to pay them off, and personal loan are given on a lower interest rate, and also you can pay back in monthly instalments.

  •  Refinance student loan:-

If you have taken a student loan and want to repay the amount of loan back, then it is a good idea to take a personal loan and pay it off as it has a lower rate of interest and usually student loan’s interest is 6.8% or higher depending on the type taken by you.

If you are financing student loan with a personal loan, then you should be ready to pay all the extra amount that you have to pay at the time of refinancing.

  •  Pay for purchase:-

If you have a credit card and you want to buy something like a refrigerator or a TV, then it is best that you take a personal loan so that you don’t have to pay back the amount of loan taken by credit card with high interest.

You don’t have to take a decision of paying on the spot because you have to think and select the type of payment method you have to choose and then pay from it.

  • Pay for a wedding:-

If you are planning to pay for any large event like a wedding, then you should consider and research about all the options to pay, but the best option will be a personal loan because of its lower rate of interest.

  •  Improve your credit:-

Whenever you take a personal loan then in your account it will show as debt and then when you pay it back it will show as repayment or instalment paid at the correct time, and this will increase your credit score and also your repayment history. This will further help you to take an additional loan if you wish to go for it.

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