Every day, thousands of people are taking out personal loans. More and more companies are springing up, offering different products suited for different circumstances. Perhaps you are considering this yourself, but are unsure how to proceed. It is essential you first seek wise advice as once you get in debt, it can be hard to get out of it. Fortunately, there is an abundance of material online and elsewhere that can guide you, setting out the pros and cons in black and white. Companies are required to be as transparent as possible, letting you know both the risks and the repayments. Here are six signs that may indicate a personal loan is an option for you:
1. You Don’t Have Another Source of Money
This sounds obvious, doesn’t it? The fact is that there may be another way for you to get some. Is there something you can sell? Are their certain luxuries you could forego to release cash? If you’re following a dream, it might be worth the sacrifice. What about asking a family member or friend? Some family members might even give you the money you need. Others will want it back eventually, but remember this: you won’t be paying interest on it as you would with a loan company.
When it comes to starting a new business enterprise, some people try crowdfunding. There are websites such as Kickstarter and Indiegogo. You explain what your idea is, provide some statistics and say how much money you need. If you raise the whole sum with Kickstarter, you can access everyone’s pledges. If you use Indiegogo but only raise half the amount, you’ll be able to access that money, minus the commission charged by Indiegogo. It’s a two-way benefit: Some people like taking a chance and have spare money to invest, and you can offer personalized benefits in return for pledges.
Business entrepreneurs try accessing money locally or look to angel investors. The latter are wealthy business people who are looking to invest in small business ideas. If your business was up and running and generating a measure of sustained income, that’s when bank loans kick in. Venture capitalists are people who make really large investments in businesses, but obviously expect high returns for their money.
If none of these options apply, a personal loan may be well worth considering. There are a number of useful comparison sites available online. I discovered this when I decided to visit here to look at the reasons people take out loans. The experts on this site listed things ranging from work to vehicles, and debt consolidation.
2. You Need to Pay for Something Essential
No matter how well you plan and budget, expenses can suddenly leap at you from nowhere. A lot of people take out car loans to cover repair costs. If you need your car for home and business, it’s not really an option to ignore the problem. People take out car insurance to cover accidental damage etc, but sometimes cars just need replacing due to age. As I said, cars are often a necessity.
3. You’re Following a Dream
We all have dreams in some shape or form. Sit down and write fifty personal dreams in one go – you might surprise yourself! It could be a dream holiday or a really special purchase like a swimming pool. You may be getting married and going on a honeymoon – surely you want this to be a once in a lifetime experience. It will cost you, however, and money doesn’t grow on trees. Weddings cost on average £25,000 to create.
4. You Have an Investment Opportunity
Investment opportunities take on all shapes and sizes. They can range from a business idea to home improvement. ‘Home improvement?’ you say, ‘I thought this would come under ‘dreams’? The thing is, if you modernize your home and garden or extend it in some way, you are potentially adding to its value. Your home can be one of your biggest assets. It’s a great feeling to sell your property for more than you paid for it.
I mentioned earlier that sometimes friends and family will be willing to lend you some money. If you are needing the money for e.g. a business, that’s different from them paying off your gambling debts! Some people have spare cash and fancy the risk of investing in your idea. If this is not an option, however, you have to look further afield.
If you want to create a business alongside your job or instead of it, you’ll be needing money for bills, websites, marketing, employees, premises, and so on. Upgrading your technology will cost you, and so will any form of business expansion. If your business idea has real potential for growth, it is not just a dream, it’s an investment.
5. You Have Lots of Debts Already
This reason might surprise you. ‘I have enough loans,’ you might say. ‘The last thing I need is a new loan!’ There are benefits, however, to consolidating all your loans into one monthly payment. Think about it: You’ll have only one debit on your bank statement to think about, so budgeting will be easier. Different loans have different interest rates. If you have just one loan with a lower average interest rate, your monthly repayments will be reduced. Credit cards have high-interest rates, so getting a lower APR is a real gain. Consolidating your loans into one can also improve your credit score.
6. You Want an Emergency Fund
If you had a chat with an investment advisor, one of the things they would recommend is having a financial buffer. This is sometimes equivalent to three months’ salary. It’s designed to cater for the time between leaving one job and starting another, or a host of other things you didn’t see coming. Some loans can take a while to set up. If you anticipate medical bills at some stage, you’ll want that money to be available immediately. After all, being ill is stressful enough without adding financial worries to the equation.
When people go on holiday with their cars, it can be expensive if they break down abroad. Expats living in another country often take out Foreigner Loans to cover unexpected things like medical fees, extra accommodation costs, or needing money for a visa.
Personal loans will cost you, but peace of mind is also a high-value commodity. Do your research. Look at the financial aspects of what you can borrow, and whether you can afford to repay the sum. What will you lose if you can’t pay it back? Some loan companies hold things you own as collateral to reduce the risk if you can’t repay. You need to go into this with your eyes wide open.