A personal loan is an excellent financial strategy for getting through the month if you’re a little bit short on cash. The proceeds of this type of loan may be used for a variety of reasons. If you need to pay a sudden unexpected medical bill or have to finance a large purchase, a personal loan will be able to cover these expenses that fall outside your normal monthly budget.
The flexibility of personal loans is what makes them so convenient for a borrower. However, if you look at it from another standpoint, it is also what makes them dangerous. With the global pandemic, thousands of people have been adversely affected by personal loans that they couldn’t keep up with.
Financially Sound Reasons to Apply For a Personal Loan
While personal loans can be extremely beneficial, it’s important to recognize when you should and shouldn’t be applying. Remember—it’s still money you’ll have to repay, and you’ll need a solid plan for paying it off without accumulating too much interest.
Here are some examples of situations where a personal loan could be the best course of action:
1 - Consolidating Debt
If you are planning on using the proceeds of your loan to pay off all your debts so that you can refocus your efforts on a single loan, a personal loan may actually be a good financial decision that will benefit you in the long run. With all your debt consolidated, it will be easier for you to keep track of your payments (since you will only be left with a singular one) and your credit score will be secure.
2 - Conducting Home Repairs
If your home is in dire need of renovation, taking out a personal loan to cover the repairs may be a good idea. This is an expense that will directly benefit you and your family, and with a clear repayment plan, you will be able to meet the terms of the loan you take out.
3 - Meeting Medical Needs
Lastly, if you have an unexpected medical expense that your insurance does not cover, taking out a personal loan can help you be able to pay for your medical bill. In some cases, having enough money to cover treatment can mean the difference between life and death. When needed, a personal loan can be the best option.
When Taking Out a Personal Loan Is a Bad Idea
You have to realize that there may be some instances where taking out a personal loan may be detrimental to your financial situation. If you are taking out the loan to go on a vacation, pay for an extravagant wedding, or even to pay off student loans, stop right there. There is no need to go into debt just because you want to go on a vacation. It is best to save money until you will have enough set aside for your vacation or wedding. Student loans are another pressing form of debt, but they often have much lower interest rates than personal loans. Paying your student loans with personal loans will defeat the purpose and will have you end up paying more than you would have with your original student loan.
Before you even think about taking out a personal loan (or any type of loan) during a crisis, it is always important to think about how you are going to repay the loan. Making sure that you have enough money and resources to repay the loan will help ensure that you do not end up with more debt than you can handle.
These days, you need a reliable lending company to help you get through tough times. Mid-Town Finance offers a variety of personal loan sizes to fit your needs. We will work to review our different options, and upon approval put clients on an affordable payment plan. We do not make payday or title pawn loans and there are no hidden fees. If you have the need for personal loans in Birmingham, AL, contact us!