When is it OK to Use a Personal Loan?

In a perfect world, all people would have the necessary funds to match every need and desire. Tuition, major appliances, cars, and the like would all be paid for in cash. Although this is possible for some, many individuals run into the occasional expense that, while great gain would be achieved through the purchase, cannot be paid for without accumulating debt. Whether the purchase is genuinely needed or not, people across the globe continue to take on debt in the form of credit cards and loans of various kinds.

As you work to plan your financial future, you may be wondering if there is ever an acceptable time to apply for a personal loan. The simple answer to this is ‘yes.’ Nearly all personal loans can be used for any purpose, and allow consumers to receive large sums of cash in a short period of time. However, before applying for a personal loan, it is important to carefully evaluate your motives. If you are considering the use of a personal loan, explore some of the best and worst ways to use this type of debt.

Consolidate high interest debt

For those who have already accumulated large amounts of debt on high interest credit cards, personal loans can be used as a tool to save a significant amount of money. Prosper borrower reviews show the value of using personal loans to consolidate high interest debt. When you transfer high interest credit card balances to a lower interest personal loan, you have the opportunity to pay off your debt sooner. Additionally, you will start paying far less in monthly interest charges, which will be immediately beneficial.

Education expenses

Tuition, housing, books, and related educational expenses add up quickly. If you did not previously plan to save for your education or the education of your children, it can be easy to fall short of covering all related expenses. Because an education helps individuals obtain higher paying jobs, a personal loan can act as an investment for the future. The added wages that someone with an education will earn over the course of his or her career often provides justification for the loan. However, if you do obtain a personal loan for educational expenses, be sure to only apply for as much as needed. Also, create a plan to pay off the loan as soon as possible rather than paying the minimum payment.

Making smart decisions when using a personal loan

While there are certainly positive uses of personal loans, there are also irresponsible uses. Before applying for a personal loan, deeply consider the long-term benefits of accepting a loan. Will you end up saving a substantial amount of money as a result of a lower interest rate on a balance transfer? Will the loan act as an investment in your future, or the future of your children? Or are you instead seeking to fulfill a ‘want’ that can wait until you’ve saved the necessary funds? Through thoughtful planning and being honest with yourself, you can be sure that you are making the best use of personal loans.