If you are in need of some extra cash, you won’t be the only one. Many people find themselves in need of extra capital, even those with high salaries or comfortable lifestyles.
Nowadays, accessing cash quickly, via options like a personal loan online, is far more flexible and manageable than ever before. Traditionally, you would have to visit a bank manager, trawl through your finances, and plead your case to explain why you need the loan. With the development of the internet, this is no longer the case. Reputable lenders can carry out credit checks in an instant, and decide quickly whether you would be a reliable borrower.
Placing the power into the borrower’s hands is advantageous for many reasons, but it has caused some problems. Being able to access a loan so easily can mean that people have unnecessarily applied for a loan and not properly looked into the repayment scales or understood the terms of the loan.
It is really important that when considering a loan, you weigh up all your options;
- What do you need the money for? i.e is the loan absolutely necessary? Personal Loan Company Wonga say that you should ask yourself three questions when applying for a loan, 1) what is the loan for, 2) can you afford it, and 3) what will the loan cost you overall? By asking yourself these questions, you can see whether a personal loan makes sense or not.
- Can you draw on savings instead? This is a good option if you do have a bank of savings to fall back on, and is usually a better option than applying for credit.
- Could you ask friends or family for help? If you can, is there help available? If an emergency bill has hit, for instance, and you are considering using a loan to cover it, could a family member lend you the money instead?
- Is your credit file able to take the hit? Each loan you take out impacts your credit file. You want to have a strong credit file in case you apply for a mortgage or bank account, or other financial product. Taking out a loan now could impact your file, so have a think about this.
There are other reasons to take out a personal loan other than excess spending.
For instance, Huffpost.com says that taking out a loan to pay off a credit card is arguably the best reason for taking out a personal loan. Their rates are lower than those for most credit cards. They say, “Paying off your credit card debt with a personal loan will help you save money. You might even want to think about getting a specific debt consolidation loan or lower interest personal loan.”
You might also consider a personal loan for a car repair, or educational fees. These are payments which are necessary, i.e. you need your car to get to work. Educational fees might help boost your earning potential in the long run, so it is important to weigh up these long term benefits too.
It is really important that when applying for a personal loan, you think carefully about your decision and don’t make an impulse choice. In some cases, a personal loan is the right choice. You should also choose a reputable lender, with flexible repayment terms, so that you are in control of your capital once that decision has been made.