When Does It Make Sense To Take A Personal Loan?

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When Does It Make Sense To Take A Personal Loan?

When Does It Make Sense To Take A Personal Loan?

For noble reasons, many people would choose delayed gratification rather than immediate satisfaction. Saving money to avoid borrowing and to prepare an emergency fund would be one of your life’s wisest decisions.

However, there are certain situations when taking a loan is probably a wiser choice than simply saving for the later days. If you have the discipline to pay up on time, you can get a better financial future if you know when is the best time to get a loan.

Here in Singapore, we have one of the world’s highest cost of living, perhaps relying solely on savings might do more harm than good. So, here are four of the best reasons to take a personal loan.


1. Repayment For Credit Card Debt

Arguably, the most enticing feature of credit cards is the convenience of its use. At times, you might forget you’re not using your hard-earned money and go on a shopping spree. You might also become complacent that you don’t have to pay the full amount, and letting the interest roll over again and again for months.

Unfortunately, not knowing that credit card interest rates could go up to 25% a year, you can get trapped in the vicious cycle until you could not keep up with the payment. Though it seems counter-intuitive, one of the best solutions to ease the burden from credit card debt is to take a personal loan.

From the money that you’ll get from a loan, you can pay your credit card dues. After dealing with the credit cards’ high-interest rates, you can later pay the personal loan with a lower interest at about 15% and save more money. You can even ask your credit card provider for a balance transfer loan to get an interest-free period for a more straightforward payment method.

You can also use this same strategy for debt consolidation, where you pay up the loans with higher interest rates.


2. In Case of Sudden Expenses

You may be considering yourself as a good saver. However, life happens sometimes: your modest pile of spare cash is not enough, and suddenly, you find yourself in dire need of a large sum of money. Even if you own many assets, it might be impractical to sell for a lower price or to wait too long to liquidate them.

Having insufficient cash or easy-to-liquidate assets is when a personal loan comes in handy. Events such as expensive medical treatment, family members’ immediate needs, downpayment for a wedding, and additional cash allowances can help you enjoy the most of your once-in-a-lifetime honeymoon vacation. However, always take a loan that can only help you solve your short-term problems without ruining your long-term plans.

You can ask your loan provider if they have a personalized product to amend your sudden expenses. Finding a loan with flexible terms of payments could improve your relationships and even save lives without the cost of your legs and arms.


3. Education

Investing in education is another wise decision that you can take. You could not simply calculate the return of investment from learning professionally to improve your career, financial standing, and overall quality of life. So, it’s only reasonable to put education into your priorities. However, as much as you may want to put serious consideration in learning, the financial challenges might be too much to handle. In that case, you might need a personal loan.

Whether you’re a student who lives independently or has parents who can’t support your education, there’s a specific loan for such cases; ones called student loans. From the term itself, student loans target students who want to finance their education.

Of course, you should be an enrolled student to qualify for this loan. Student loan enables you to pay for your textbooks, tuition, and other miscellaneous fees. Fortunately, many banks offer interest rates ranging from 5% to 6%, which is way lower at about 30% to 50% compared to conventional personal loans.


4. Purchasing An Expensive Item

Every once in awhile, you may want to feel rewarded for doing a job well done. Perhaps by buying an expensive but functional item for your home. Big-ticket products like big-screen televisions, sofa sets, kitchen appliances, and other costly renovations can be purchased comfortably in installment terms with 0% interest using credit cards.

However, not all credit card providers offer a 0% interest installment plan. Many will let you pay on terms, but will not allow you to pay without the interest rate. You should first check the interest rate in taking a personal loan. Once you find out that the interest rate from a personal loan is lower than the from swiping a credit card, you then know which is the better option.

Having enough cash from your installment personal loan, you can pay in full whatever expensive item you felt worth taking home. With a few additional due diligence, you can still save money without feeling deprived because of your prudence.


The Advantages Of Taking A Personal Loan

As with any kind of financial tools, personal loans can either make or break your financial goals. If used for the right reasons, taking a personal loan makes a lot of sense as it has many advantages.

First, it will let you plan before making any kind of purchase. Unlike the credit cards that are intentionally designed for you to go on impulse buying, the inconvenient nature of personal loans would force you to take a moment first.

Second, personal loans usually have lower interest rates. As already mentioned, you can even use the low interest to pay up other debts with high rates and get more savings in the long run.

Finally, personal loans are quite straightforward when it comes to dues. Having fixed terms with a fixed amount of interest rate, you know exactly how much you’ll pay and for how long, which gives you more manageable financial planning. If you check the credit card statements of accounts, you might get stressed out for the complications of how it was computed.

In conclusion, personal loans are of great purpose if you’re searching for quick cash resources with low payment terms at a reasonable interest rate.



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