Personal loans- when to use them

Personal Loans and When to Use Them

There’s no denying that plenty of people are thankful for the presence of small lenders. Banks have their purpose, for sure. But the market for these financial behemoths are clearly businesses who are operating on the same scale as they do.

In addition to this, small lending institutions also help people who are in dire financial need in avoiding loan sharks. All while asking for reasonable collaterals which their borrowers are likely willing to put on the line.

However, with the accessibility of personal loans, some are mistakenly inferring that they have the freedom to file for loans indiscriminately. This, of course, goes against the advice that numerous self-help books out there are trying to inculcate.

Ultimately, the question is – when is personal loan a reasonable decision?

Inevitable Social Events

It’s one thing to claim to not want to shell out lots of money for a child’s fifth birthday, and another to actually believe it. There are events in a person’s life that are too important to skimp out. Weddings, for example, can still be expensive even if minimal expenses and guests are taken into account.

When these events and social gatherings are just around the corner, it might be a good idea to check out with a reputable financial institution. A personal loan isn’t that difficult to have approved. Especially if there’s plenty of good reason for them to believe that the borrower is capable of paying back on time.

Brushing off social events is always an option, of course. But the thing is, humans are intrinsically social creatures. These gatherings will always be a part of human culture. In other words, it’s perfectly reasonable to file for a personal loan in such scenarios.

Financing An On-the-Spot Purchase

There are plenty of stores, whether online or actual, who sell expensive items on an installment basis. Although this may seem like a perfect offer for anyone who needs the product immediately, jumping on the offer immediately isn’t always a wise decision. It’s rarely a wise decision, in fact.

A more practical solution is to opt for a personal loan and use that money to pay for the item in cash, instead. This is a better idea because personal loans have considerably lower interest rates than what stores offer for installment prices on their goods. To be fair, there may be some exceptions to this such promotional offers.

Needless to say that such a purchase should be a need not a want. Or, in a bigger perspective, an investment on something that will eventually help earn more than what is spent on it.

Read also:

Types of Loans Available in Philippines

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No Coin Flips Needed

The deciding factor on whether to file for a personal loan or not is rather simple. The practical nature of the loan should be taken into consideration. Mainly, if the money borrowed is to be used for something useful.

However, it does get a bit tricky along the way. Especially with regards to assessing the importance and practicality of weddings, birthdays, and other special occasions. In such cases, discussing it with close family members may be a good idea.