According to statistics, the average American has $90,460 worth of debt.
This is a high number, but it encompassed all types of debt, from home loans to credit cards.
Personal loans are one of the easiest types of debt to apply for. However, this doesn’t mean you should take out a personal loan for just any reason.
Are you asking yourself, “should I get a personal loan?” Or wondering what is a good reason to get a personal loan?
Read on to find out some of the best reasons to get a personal loan.
1. Consolidating Debt
One of the best reasons to get a personal loan is if you’re looking to consolidate your debt. If you hold various types of high-interest debt, such as credit cards and retail accounts, it can be a smart move to consolidate these with a personal loan.
After you go through the personal loan approval process, you can take the lump sum you receive and use it to pay down high-interest sources of debt. Once you’ve done this, you can concentrate on making the monthly payments on your personal loan, rather than a collection of high-interest debts.
As long as you can get a reasonable interest rate on your personal loan, consolidating your debt is usually a savvy move.
Are you wondering how to get approved for a personal loan with a tanked credit score? One of the best ways is to prioritize making regular payments on your debts and accounts prior to applying for a personal loan to notch up your credit score.
2. Emergency Expenses
Another viable reason for taking out a personal loan is if you’re facing an unexpected emergency expense. Rather than covering this with a credit card and incurring exorbitant interest, it might be a better idea to look into your personal loan options.
Personal loans for emergency expenses can also often be a better option than applying to friends and family for help. Incurring debt with family or friends can jeopardize relationships. Avoiding the risk of this is usually far more valuable than the money you’ll pay in interest on a personal loan.
3. Capital Expenses That May Produce a Good ROI
If you’re wondering “should I get a personal loan?”, ask yourself whether the money you borrow can help you generate some kind of return.
For instance, maybe you have been thinking of installing solar panels on your home but don’t have the capital. If a solar system will provide a good ROI over time, and you can put the money you save on your energy bill to good use—such as stockpiling it into a savings fund or annuity—then this could be an ideal situation to take out a personal loan.
Or, maybe you are looking to sell your home, but need to make some improvements or repairs and don’t have the cash on hand to do so? If the improvements will increase the selling price of your home, then taking out a personal loan to have them done might be a smart idea.
Also, expenses don’t always have to be capital in nature to provide an ROI. Maybe you’re renting and you’ve found a cheaper rental or a better paying job out of state, but don’t have the funds for moving? This is another example where you could get an “ROI”.
Just make sure that ROI is certain. If you use a personal loan to speculate on the stock market but lose it all, all you’ll be left with is more debt and more monthly payments to make.
Now You Know the Best Reasons to Get a Personal Loan
There are a lot of reasons why people get personal loans, but not all of them are good ones. For instance, creating debt to go on vacation is definitely not the best reason to get a personal loan.
The above reasons all have the potential to save you money and leave you in a better financial position.
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