10 Reasons Why People Get Unsecured Personal Loans
There are many reasons why people will suddenly find themselves strapped for cash. We all go through some financial difficulties sometimes, and at those moment, getting an unsecured personal loan may be your best option.
However, the idea of taking out a loan may be daunting for some. With the many options for personal loans out there in the market, it is easy to become overwhelmed. There are some loans, called secured loans, that require the need for some valuable assets to secure the loan. This may be more of a commitment than most of you may want. This is where unsecured loans come in.
What is an Unsecured Loan?
An unsecured loan is a type of loan that you can take out without having to put up any form of collateral like a house or a car. Personal loans of this nature only need a few things to get. You’ll just have to show your ability to pay back the loan, your credit score, and your application to get approved.
The rates and terms of the loan depend on the lender that you choose. But the main thing that they have in common is a set repayment schedule that is flexible enough for you to meet your payments. This is also a good idea to take on for the short-term since it means that you pay less interest in the long run.
Reasons Why People Get Unsecured Personal Loans
Here are a list of reasons why people get personal loans:
To Consolidate Debt
Probably one of the most common reasons why people obtain personal loans is to consolidate debt. You may ask yourself why should you take out a loan if you already have so many loans to pay off? The reason for this is simple. Having one loan combines all the other debt that you have into one single repayment plan and also reduces the amount of interest that you’ll have to deal with.
If you have so many monthly payments for student loans, car loans, credit card bills, etc., this may all add up into getting you deeper into a bad financial situation due to all the interest you’ll have to be paying. If you combine all these into one singular loan, the interest rate will not only go down but it will also make repaying what you owe easier. It allows you to have only one monthly payment that is more convenient for you.
For Emergency Situations
There are a lot of unforeseen expenses that can happen throughout your life. And most of these unexpected costs can hit you at times that aren’t necessarily financially convenient. This is when personal loans can really help you out.
With a personal loan, you’ll be able to get the funds that you need to deal with the situations at hand without having to worry too much. It also gives you the freedom to get your bearings back in order to repay what you owe.
To Pay Off Credit Cards
Using an unsecured personal loan to pay off your credit card bill is one of the most money saving moves that you could ever make. This isn’t because you’re just paying a loan off with another loan.
Personal loans have a lower interest rate than most credit cards. This means that you will be able to save on the amount of interest that you pay every month.
For Home Improvements
Home improvements can take a toll on your savings as much as any other costly endeavor. This is especially true if you don’t have that much equity on your home or don’t wish to take up an equity line of credit.
But if you want to get a new roof, install some hardwood flooring, or even redo your kitchen, a personal loan can be a good option for you. In this way, you won’t have to blow all your savings off at one go and still be able to get your house fixed the way you want.
To Improve Your Credit
Taking out a loan to improve your credits score is one of the easiest ways to get good credit scores fast. Credit bureaus actually look into your lines of credit like installment loans.
This means if you pay for your personal loans on time within a span of 6 months or more, this will increase your credit rating substantially. There are many options for loans for people with bad credit but they are usually with smaller amounts. Using this way to improve your credit score can open up more doors for you in the long run.
For Creating Emergency Funds
You don’t have to wait until you have an urgent situation to take out a personal loan. Getting a loan for rainy days is a good option, especially if you are still trying to establish your savings.
Creating an emergency fund through a loan will allow you the breathing room that you need to get on your feet without having to worry about unexpected expenses that can arise at any moment.
To Pay For Medical Bills
There are a lot of medical expenses that aren’t covered by insurance. And especially for the uninsured, medical bills can be daunting to pay off.
Medical procedures like fertility treatments and cosmetic surgery isn’t always covered, so personal loans can be a big help in paying for it. Other expenses like for child adoption is also a popular reason for getting a personal loan of this nature.
For Starting a Small Business
If you want to start your own small business venture and can’t get investors for it, you can use a personal loan to startup yourself. In today’s economy, having just a regular job may not cut it and having a side business is something that can help you out financially. Instead of waiting to hear back from investors, you can finance your dreams yourself with an unsecured personal loan.
All you have to do is plan your business properly and figure out exactly how much you will need to get off the ground. If it is small enough, you can get a personal loan to get the ball rolling in no time.
For Weddings and Funerals
There are certain events in a person’s life that shouldn’t be skimped on. A few of those events are weddings and funerals. These are the memorable moments that can take a toll in a person’s bank account. Therefore, taking a personal loan for these events make it easier for you to handle the financial aspect of things so you can be in the moment more.
For brides especially, weddings are the most important days of their lives. This means that a bigger budget has to be lain to make everything perfect. However, wedding dresses alone can cost up to $1,500 and more. And wedding cakes can range anywhere from $300 to $5,000. So instead of spending all your life savings in one go, you can take out a personal loan to be able to offset the costs for your special day.
Another once in a lifetime event is a funeral, and they can cost some money too. This is especially true when you are dealing with a sudden death in the family. You will have to arrange for a funeral parlour, the casket, and the burial plot needs to be purchased. All this can add up to a hefty amount. Taking out a loan to cover the costs can ease the burden of expenses so you have time to grieve and allow you to pay what you need in a longer period of time.
To Buy A Car or Other Vehicles
There are many options for you to get a car through a loan. But most of these loan options can be secured loans and will need you to have a good credit score to obtain. Having said this, if you have a bad credit score, taking out a personal loan to get a car may be the best way to go.
Personal loans are not only easier to get with bad credit, they also have better terms and conditions to allow you full ownership of your vehicle.