When Is The Right Time To Take A Personal Loan
There may be times in life when you simply can not afford the things you plan to make happen. These things could be anything from a smooth sailing vacation to Hawaii to a life-changing experience like marriage. And you’d like to spare nothing on your way to achieving these dreamy goals but your current finances are simply not enough!
A personal loan seems to be the best idea to make these half-baked dreams a reality. But as you start contemplating the idea, your mind comes up with various questions of ‘exactly how does it work?’ or ‘How plausible is the idea?’. Don’t worry, we got it all covered for you in the below article.
How does it work?
Personal loans can be both secured and unsecured. While a secured loan is always the more profitable bet, it may not always be an option.
In a secured loan, the loan may be provided against a collateral that can be seized on the non-payment of the loan. These collaterals can be anything from your bank account, property, or car. But with collateral comes security, and this helps you avail the loan at a lower interest rate.
In an unsecured loan, no collateral is needed to avail the loan. This makes it very risky for the lender and so, a higher rate of interest is charged. However, the rate of interest also depends on your credit rating and debt-to-income ratio. In this case, the higher your credit rating the better.
When is it plausible to take a Personal Loan?
Below are a few examples of when taking these loans becomes a good idea.
- Higher Interest Debt Payments: When you have to pay off debts that have an even higher rate of interest than these loans.
- Arranging for important events in life: These events can be anything from marriage to a long vacation, to arranging any other event.
- Sourcing for Home renovation or Big Purchases: You may want to look for a loan to fund your home renovation plans or for purchasing a car or bike or whatnot that may be a little too expensive for you to afford without a loan.
So, all these reasons may be enough for it to be good idea to take a loan. However, make sure to be prudent about the amount needed and make your dreams a reality!