Using A Personal Loan For Your Personal Needs
When it is about financing personal needs, people usually look for immediate cash. Some will even settle for loans with high-interest rates when they really need the money. However, that doesn’t seem practical because it poses more risks and uncertainties.
Instead, your goal should be to make wise and informed decisions when it comes to your finances. You have to carefully evaluate existing options as to how you can get sufficient funds for your personal needs. Consider the fact that your choice right now may greatly affect your financial stability in the future.
Going back to loans, a lot of people see them as a recourse when there are no other options. But if you think about it, in just a matter of days, cash will be available for you. Additionally, you also don’t need to worry about interest rates, because they are relatively low compared to other types of loans.
What Is A Personal Loan?
There are different types of loans intended for different purposes. However, a personal loan is a certain type of loan that you can use for any reason as long as it is valid and legal. You can use the money you collected from the institution to pay school fees, medical bills, debts, and other expenses.
When you apply for a personal loan, you need to disclose your income, assets, credit score, and credit history. Those documents will help the financial institution to assess if you qualify for the loan. Thus, your application needs to go through specific procedures because they need to make sure that you can pay the loan on time.
Furthermore, lenders usually focus on your credit scores. Having a higher credit score will help you get a low-interest loan. Needless to say, your debt-to-income (DTI) ratio must also be at a low level. Ideally, your DTI ratio should not go over 36% to be considered low. This is because the DTI ratio is a determining factor if you can still afford to take out another loan.
If you believe that your current situation isn’t good enough to get approval, try to work on areas that will improve your credit and income situation first. Or, you can study the best ways to make sure you are on track with loans.
How Does A Personal Loan Work
When taking out a loan, it is always important that you understand how it works. After all, you don’t want to end up having trouble paying the same loan due to misinformation and terms you didn’t understand.
With regards to that, you need to have a good grasp of the different types of personal loans. From there, you can start evaluating your situation and finally decide which type of loan is appropriate.
Loans generally have two categories: secured and unsecured loans.
First, a secured loan has collateral or an asset offered that’s worth something that the lender can seize in case of default. In short, the bank has nothing to worry about in case of nonpayment as they can still recover a reasonable amount of money to cover the debt.
Meanwhile, in an unsecured loan, lenders rely on your creditworthiness instead of requiring you to put up collateral. They cannot go after your assets in case of default. However, they can file a case against you to recover an unsettled balance. In addition, your credit score will also be seriously affected in the case of a mispayment.
When your application for a personal loan is approved, the lender will deposit the money directly into your bank account in lump-sum. Then, you will be required to pay a certain amount on an installment basis at a fixed interest rate over a fixed term.
Furthermore, you also need to consider several personal loan benefits to help you decide if you should take out this loan. Take a look at this list of personal loan benefits:
- Rates are reasonable
Actual interest rates will depend mostly on a borrower’s credit score and credit history. Hence, having a good credit score and solid incomes will ensure relatively lower rates.
- Predictable payment schedule
Lenders will provide you a schedule of your payment and when you will be done paying the debt. Aside from that, you know the exact amount including the interest that you need to prepare for each installment payment.
- It can be used for different purposes
Unlike the other types of loans, personal loans are not just for specific purposes. There are just a few exceptions, but generally, you can use the fund for any personal expense.
- It can build your credit history
Here, you are paying on an installment basis. Thus, you make the necessary payments on time and pay the total amount at the end of the fixed term. That’s one way you improve your credit score and become a credible and trusted borrower.
- No collateral required
In case of an unsecured loan, you don’t have to put up collateral. Hence, you can still borrow despite having no valuable assets to offer as security.
The Different Ways to Use a Personal Loan
A personal loan can help you streamline debt, provide sufficient funds for personal expenses, and finance big purchases. How you spend it will depend on your choice and needs.
Here are the different ways you can use a personal loan:
- Paying off debt
Borrowers who have outstanding debt on more than one credit card can have all their debts consolidated. By applying for a debt-consolidation loan, you can reduce the costs that you incur monthly. With the help of a personal loan, your payments can be streamlined into one bill every month.
- Financing home improvements
There are different ways to finance your home renovations, a personal loan is one of them. The money you can get from the loan can help cover renovation costs. However, you have to be mindful about the interest that you incur while renovating your home, you might end up spending more in the long run.
- Financing education
Life is a never-ending learning process. There is so much to explore, especially if you are eyeing a better career. If you want to develop a new skill to qualify for a particular job or to get a promotion, a personal loan is a good choice to cover the costs of the courses you need to take.
- Covering business expenses
Entrepreneurs who have just started their business and do not have enough materials, supplies, and capital for their day-to-day operations might consider taking out a personal loan. Whether it is about starting a business, maintaining a current one, or planning for expansion, you can always do good with some extra funds.
- Paying for a funeral
Families can resort to a personal loan when the deceased has no life insurance and they have no assets to cover the costs.
In times of emergency, people will exhaust all other options first. But in some cases, funds will still not be enough. Hence, this calls for a need to secure a loan.
- Wedding costs
A wedding is a significant event. There is a lot of preparation needed and for sure, there is a corresponding cost for it. A loan can help you get the wedding that you dream of while not asking an extreme lump-sum payment from your pocket.
- Tax debt
For entrepreneurs and self-employed professionals, not being able to pay taxes on time would cause penalties. Taxpayers may opt to take out a personal loan to cover these costs.
Get A Personal Loan with Blend.ph
Getting a personal loan is a significant financial decision. That is why it is important that before going for it, you compare and understand all the options available for you.
For an easier access to a personal loan, check out Blend.ph’s personal loan product. With the application fully online, you can process your personal loan application at the comforts of your home. Depending on your application, you can gain access to 50,000 to 2 million pesos!
Start your application and sign up for a Blend.ph borrower account today!