A Borrower Be: 9 Situations Where Taking out Loans Makes Sense

Debt sometimes comes with negative associations, but taking out loans can be the perfect solution in some situations. We look at 9 good reasons to borrow.

The thought of taking out a loan might make you cringe. Owing money and adding to debt can be nerve-racking. But don’t panic, taking out a personal loan could be a good thing!

There are many cases when a loan will help you rather than hurt you. It’s all about staying in budget, making wise financial decisions, and making them for the right reasons.

To help you figure out if a personal loan is right for your situation, let’s look at 9 examples where taking out loans makes sense.

1. Pay off Credit Cards

One of the best reasons to take out a personal loan is to pay off credit card debt. It will save you both time and money.

High-interest credit card debt means more of your money is going towards interest payments rather than paying down your debt. When that happens, it takes longer and requires more money to finally pay your cards off.

But a low-interest personal loan will put an end to that. More of your money will go towards debt payments which means you’ll be debt-free even sooner.

2. Finance a Home Remodel

Need a new roof or ready to put in that kitchen you’ve always wanted? A personal loan can turn your home remodel dreams into reality.

Many people don’t have enough equity in their homes to take out a home equity line of credit. Or they don’t want to eat into that equity. Taking out loans is a great alternative to that.

Plus, a home remodel will increase the value of your house. So not only will a personal loan save you from dipping into your home’s equity, doing the remodel will increase it.

3. Buy a New Car

Buying a new car is a big purchase, and many people don’t have the cash saved up to pay for it outright. Taking out a personal loan is the perfect solution.

A personal loan also helps those who don’t have the stellar credit to get approved for traditional auto loans or credit through the dealership.

Plus, it gives you the funds you need now to buy a car instead of taking a long time to save the money up on your own.

4. Consolidate Debt

Owing on multiple loans and several credit cards can seem overwhelming. With different balances, interest rates, and payment due dates, it’s difficult to know how best to pay your debt off.

Consolidating all that debt into one personal loan takes the confusion out of it. You’ll only have one account, interest rate, and due date to keep up with.

It also helps you pay that debt off sooner. When you transfer balances from high-interest accounts into a lower interest personal loan, more of your money will be paying down your debt.

5. Pay for a Wedding

That dream wedding usually comes at a pretty hefty price tag. And when you throw in the cost of an engagement ring and honeymoon, that dollar figure skyrockets.

Taking out a personal loan can make financing your dream wedding within reach.

It also helps streamline the process. Having one loan payment versus several payments to vendors makes it easier. Plus, knowing your personal loan limit helps keep you within a budget before costs get out of control.

6. Make Car Repairs

It never seems to fail; your car breaks down while you’re dead broke. If you don’t have an emergency fund to fall back on, you could find yourself scrambling to figure out how to pay for those repairs.

That’s when a personal loan can save the day. It gives you access to needed funds and helps get you back out on the road in no time.

Even if you have bad credit, don’t worry. You can find personal loans that have no credit check. Interest rates may be higher, but it’s still a lifesaver when you’re in a pinch and need your car back!

7. Pay Medical Bills

Just like with car repairs, a medical emergency can come out of nowhere. And it’s not just hospital visits that can balloon out of control. Things like dental work, medications, and aftercare are just as costly.

Taking out loans will cover the costs of expensive medical bills. Plus, when you owe the hospital, the doctor’s office, and ambulance service, it turns all those bills into one easy payment.

When medical needs come up, the last thing you need to do is worry about bills. Taking out a personal loan can ease your stress.

8. Help Improve Your Credit Score

It might seem counterproductive to take out a loan to help improve your credit score. Yet, amazingly enough, it can do just that.

Along with many factors, the kinds of credit accounts you have count towards your credit score. The more variety you have, the better it looks on your credit.

If the only kind of credit you have is credit cards, taking out a personal loan adds an installment loan to the mix.

Just be sure to pay your personal loan on time each month or you’ll undo the good the loan did!

9. Taking a Dream Vacation

Maybe you have a once in a lifetime kind of vacation on your mind. It could mark a special occasion such as an anniversary, honeymoon, or milestone birthday. Or it could be to simply check off that almost impossible bucket list item!

Whatever the case may be, taking out a personal loan to pay for it will turn it into a “been there, done that” trip.

Dream vacations often times mean luxury and expensive. And maybe you don’t want to dip into your savings to pay for it. That’s when a personal loan can help.

Know When It Makes Sense When Taking out Loans

We’ve all been in situations when we need to borrow money. And now that you know when taking out loans makes sense, you can borrow with confidence.

Looking for more financial advice? Check out the other articles in our Business & Trading section!
 

 

 
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