There are moments in life where we would like to buy something, remodel our house or resolve a particular situation. We do not have the financial resources available to do so, and that is when that little voice inside us comes to ask “What if you take a loan?” To which we kindly respond, yes, it is a good idea.
A personal loan can be used to pay off other debts, cover unexpected expenses, finance a strong investment in your home, among others. However, these credits must be used responsibly to improve your well-being and to achieve your personal goals.
Is this the ideal time to apply for a loan? There are numerous tips for personal loan. Whether Yes or No, everything depends on several factors. Below, we will look into them:
- Is It A Need Or A Wish?
Learning to differentiate between need and wants is essential to make this decision and to know if it is the best time to do it. It is a wish when if the loan is not approved and your situation does not change at all.
For example, maybe you want to buy a new computer, but if the loan is not approved, nothing happens, you can continue working on the one you currently have.
- Consolidate Your Credit Cards
If you have several credit cards and you use your lines of credit to the maximum, request a personal loan to consolidate all your debts in a single monthly payment.
Another reason to do this is to get a lower interest rate on loan than the Total Annual Cost (CAT) of your credit cards. For example, the average CAT of a personal loan can be around 40% per year, while the average CAT of a credit card can reach 60% per year.
- Refinancing Other Type Of Credits
Like the first point, a personal loan could help you consolidate your debts and lower the cost of any credit. However, before applying for a personal loan to refinance another type of credit, consider that some types of credits such as mortgage loans can be deducted from taxes.
Analyze the advantages and disadvantages of each option and choose the one that best suits your needs.
- Financing A Purchase
Using personal credit to finance a purchase is a good decision. Once you have defined the level of need to purchase that product or service, do not forget to consider several financing options before choosing one.
In many occasions, it could be more convenient to request a personal loan to be able to settle a purchase compared to acquiring some financing directly through the seller or supplier. Never make a financing decision in the place where you are going to make the purchase, give yourself the opportunity to review more options so you can choose the most competitive one.
- Pay A Large Expense
This applies to any situation, expected or unexpected: a medical accident, a wedding, a vacation, a return to school, etc. A personal loan from Crawfort Singapore could be a good idea if you are going to have to spend heavily and need to have a period longer than a month to pay.
This will prevent you from paying the high-interest rates on your credit card while also keeping your credit history in good shape.
- Improve Your Credit History
A personal loan could improve your credit rating in two ways: First, avoid having to default on your credit cards by giving you a more flexible financing option.
Second, it could decrease your proportion of available credit use – the total amount of credit you have used against your total line of credit. The smaller this ratio, the better your rating as the personal loan increases the amount of credit you have available for your use.
In conclusion, a personal loan can be a very useful financial tool as long as you use it responsibly.