4 Reasons to Take Out a Personal Loan

There are many reasons why you may need to borrow money. You may fall short of cash while making an important purchase, or just need some money to cover an unexpected expense. When you’re in urgent need of funds, quick access to the required funds is what counts. Sometimes, borrowing from family or friends might be an option. But you may still not be able to arrange the required amount quickly enough. In such a situation, taking out a personal loan may be a great idea. A small personal loan will grant you cash very quickly. The fact that it is unsecured makes it even better. A personal loan is an unsecured loan taken from either banks or non-banking financial companies (NBFCs). You don’t need to pledge any security or collateral while availing a small personal loan. You also have the flexibility of using the funds for your personal needs (unlike an auto or home loan). Here are 4 reasons to take out a personal loan:

1. Consolidating Debt

Consolidating debt is one of the most common reasons for taking out a small personal loan. If you have multiple loans, that’s already a bad situation to be in, in terms of personal savings. All these loans will have varying interest rates as well as balances due, and this is where a personal loan can help. Using a small personal loan to consolidate debt will allow you to combine all your outstanding balances into one single payment. This is great, because now you have only one monthly payment to take care of, and a clear idea of when you’ll close your loan. You can also do this for your credit cards.

2. Making a Large Purchase

You never know when you may need to make a big purchase for your house. We’ve all heard about how unexpected medical emergencies can be, and well, household emergencies can be sudden as well. You may need to get a new dishwasher, a new sink, or a set of new appliances, depending on your need. If you don’t have the funds on hand, a small personal loan can help you out. Sure, you can also use the funds for entertainment options, like a gaming console or an entertainment centre, but it’s best if you use personal loans for essential items like refrigerators, dishwashers, or ovens.

3. Taking a Vacation

If you just got married and exhausted all your savings on the wedding, a personal loan can be used to take care of your honeymoon, especially if your destination is an expensive one. Just like how a personal loan can be used to take care of a medical emergency, it can be used to show you the world as well. A personal loan can take care of all your expenses. This includes the cost of your tickets, transportation within the city, and of course, hotel accommodation.  You’ll also need some spending money with you for food, attractions, souvenirs, and any additional costs that might come up.

4. Creating an Emergency Fund

This is also a very solid reason for taking out a small personal loan. Most of us would fall short of cash if we were to take care of unexpected expenses using only our savings. If you don’t have an emergency fund yet (amounting to at least three months’ salary), or you’re still working on it, a personal loan might help accelerate the process. Ultimately, it’s not a good idea to have little to no savings considering the various emergencies that can come our way. 

In Conclusion

While there are many reasons to borrow a personal loan, you need to check a few things first. You need to be sure of the interest rate that you will pay, and aware of the different fees your lender charges. You should be able to afford your monthly personal loan EMIs, and that is a result of borrowing just how much you need.
 

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