Personal Loan 101: When Is the Best Time to Apply?
Anyone can be strapped for cash every once in a while. If this happens to you, you have the option to apply for a small personal loan. It is an unsecured loan, which means it often has no collateral.
The funds can be used for just about anything. Most lenders won’t even ask you what you plan to do with the money and just make sure you can pay it back. Before opting for a personal loan, here are some circumstances when applying for it makes the most financial sense:
1. Improve Your Credit Score
Don’t let a history of other debts and missed payments stop you from taking out a personal loan. In fact, securing one and paying it off on time could help improve your credit score. It just shows that you can handle different types of loans responsibly. Just make sure you are borrowing money that you really need and you will be able to pay all of your other bills on a timely manner.
2. Consolidate Credit Card Debt
Owing a balance on one or more credit cards with high-interest rates can help you save money by applying for a personal loan. Considering the difference in the interest rates of credit cards and personal loans, you are likely to pay less interest and pay off your debt faster in total.
Besides securing a personal loan, another way to perform credit card consolidation is to transfer balances to a new credit card with a lower interest rate. Look for offers that waive the interest rate for a specific period.
3. Finance a Home Improvement or Big Purchase
If you're buying new appliances, installing a new furnace, or making another major purchase, taking out a personal loan could be cheaper than financing through the seller or putting the bill on a credit card. However, if you have any equity built up in your home, a home-equity loan or home-equity line of credit could be less expensive still. Of course, those are both secured debts, so you'll be putting your home on the line.
4. Financing a Costly Event
Major milestones in life that are worthy to be celebrated, like a wedding, anniversary party, or birthday, can be expensive. Instead of paying for it with a credit card, it could be less expensive if you take out a personal loan. However, although these events are truly important, it’s wise to consider if it’s worth splurging on. After all, it will cause you to go into debt for years to come.
5. Settling a Debt with a High-Interest Rate
Loans come in different types, and a personal loan isn’t necessarily the most expensive. This is why applying for one can be your best option for saving money. You can also replace an older personal loan with a new one to cut down costs. However, before doing this, be sure to check whether there’s a prepayment penalty or origination fee.
Personal loans can be expensive. There are also often better alternatives for getting the money you need. However, there are certain circumstances that taking out one can be the most beneficial for your situation.
If you think securing an installment loan is right for you, get in touch with Mid-Town Loans. You can depend on us to offer loans with straightforward repayment options. Contact us at 931-962-1240 to start your loan application!