We often get calls from banks and licensed lenders to avail of a personal loan that we are pre-approved with. But its not a good idea to avail of a personal loan without having a specific use for it.
Of course, we get those suggestions from telemarketers to avail of the loan for vacation and other enticing purchases that we can make. But we should also be prudent when it comes to using loans for purchases.
It is a good idea to have a specific goal for our personal loans. This will help us have direction on using the proceeds and maximizing the cost of borrowing money. Any personal loan taken without a specific purpose would only be a waste of resources, both time and money. Here are 5 good guidelines you can use for availing of personal loans.
1. Emergency Expenses
You have to consider the expense to be an emergency before you take on a loan. The reason for this is that buying something that can actually wait can be bought by saving money. Instead of getting a personal loan where there will be a cost on borrowing that will form part of the payment, saving avoids that additional interest being paid. These expenses include vacations, luxury purchases, and events.
2. Financing Purchases
There are certain items that we need to buy but are too costly to get from our existing savings. Sometimes getting a personal loan is the best option you have by financing your purchase. It may be more money being paid in the long-run but pulling out cash from investments can result to bigger losses.
3. Time Sensitive Purchases
This is quite similar to point number one. Purchases or payments that need to be made within a specified period can be addressed by getting a personal loan. This will help you settle the purchase instead of losing it to someone who already has the amount of cash to pay for it.
4. Refinancing Debts
This can be done to make sure that all your debts are consolidated and paid. It helps for better tracking of bills to pay and having a single interest rate for the all the loans being consolidated.