Any money borrowed from a bank or credit facility to be paid back monthly installments is called a personal loan. Personal loans are mostly without collateral, a factor that makes it more expensive than loans with securities. 

There are several reasons why people obtain personal loans including:

Refinancing existing debts

In a bid to consolidate multiple existing loans, people take personal loans. In this case, personal loans are called debt consolidation loans. 

The characteristics of debt consolidation loans that make them a better option include:

• They are much easier to manage in comparison to the series of credit lines removed
• They offer predictability. This is made possible by the fixed installment repayment mode.
• Monthly payments could be as low as seeing in the case of credit card debt

Starting a Small Business

A legitimate reason for borrowing money is for entrepreneurship. Personal loans are often taken by people who want to launch a new enterprise, especially when it is not a full-time enterprise. A personal loan works well when the capital needed does not guarantee to get a business loan.

Unexpected major expenses

In life, irrespective of how well we plan, unforeseen circumstances happen every day. These unexpected events could either be a minor one that we can fix easily or one that requires a significant amount of money that requires us to turn to a loan. Personal loans are very useful instruments for this purpose. Some of the major unexpected expenses that could arise are emergency automobile repairs, medical emergencies, and even urgent home repairs.

Alternative to payday loan

People turn to easy-to-get payday loans when they are choked financially and they are just looking for any breather. Unfortunately, the predatory nature of payday loans often lands people in more difficult financial situations. Personal loans are good alternatives to payday loans because they are less complicated and involve lower APR rates. You can even read more from Loanry.com on how personal loans serve as a viable alternative to payday loans. Having said that, it is also important to ensure you have enough information on the various alternatives available before making a decision.

Financing major one-off purchase

Another purpose personal loan serves for people is to finance a major one-off purchase. This will be a good idea if:

• You qualify for a significantly lower interest rate than is available on your cheapest credit card APR. This is determined by factors such as your income and credit.
• The vendor refuses credit cards
• The total of your credit limit does not cover all the cost and you are open to getting another card.

Funding a wedding

Another reason why people take personal loans is to handle their wedding expenses, especially the ones that must be settled on time. For example, payment for a reception hall. The flexibility that comes with personal loans makes them the perfect option for intending couples.

Vacation

A lot of planning as well as a significant cost could go into a vacation plan. You may not have the financial capability to take care of the bills at once, personal loans allow you to make necessary expenses and payback in comfortable amounts for months.

Relocation

If you have to move to a very far distance, perhaps for a job or opportunities, the cost of moving with your family can be quite expensive. People take personal loans to ensure seamless movement. This would cover the movement of your properties, purchase of new furniture and automobile transfer.

Benefits of taking a personal loan

• Higher borrowing limits

Borrowing limits of personal loans are often higher than that of credit cards. This gives room to significant purchases as in the case of unexpected major expenses.

• Lower interest rate

Usually, interest rates of personal loans are lower than that of credit cards. This is one of the key factors why people choose a personal loan as it is cheaper to get and maintain

• No need for collateral

You do not need to use your house or automobile as security for getting personal loans hence the tag unsecured loans.

• Predictability

Personal loans are paid back in monthly installments at a fixed interest rate, hence repayment prices are easier.

• Longer repayment term

The repayment period for most personal loans is up to five years. Some other loan providers even allow seven years hence making repayment easier.

Personal loans do look a great catch in many instances. If you are experiencing any of these reasons listed above, it might be the perfect time to apply for a personal loan.

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