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There are certain situations when getting a personal loan may be a viable option. Unlike other loans that are earmarked for a specific purpose only these types of loans tend to offer the borrower a free rein on how to use the funds once released.
An auto loan has the car itself as collateral and the collateral for a mortgage is the home. Most of the time, personal loans are unsecured. As a result, the rates involved are going to be higher. You may also sign up for a secured personal loan if you have some valuable asset you can put forward and lower the interest rate in the process.
Below are some of the instances when taking out a personal loan is a good idea.
Improve your credit
There are certain ways that taking out a personal loan can benefit you. If you happen to have mostly credit card debts on your record, you can benefit from adding a different type of debt in your history to mix thing up and a personal loan can do just that. It can help the utilisation ratio of your credit card since you will not have to max out your credit limit, thus giving you a better credit score. If you pay the loan in time, then you can benefit from getting a better credit score.
Cover unexpected Medical bills
Nobody plans on getting sick but sometimes, you or a family member might be faced with an unexpected illness. Instead of just worrying where you can get the money to cover the costs involved, you can secure a personal loan to finance the treatment. The fact that personal loans are not restricted to be used for certain purposes only makes it ideal among the borrowing public.
Consolidate your credit card debts
If you have a two or more credit cards which are charged to their limit, a personal loan can be a good option to consolidate them and get the charges combined into one single loan that you can pay off every month. Aside from the convenience of having only to deal with one single loan, you also get the possibility of APRs or annual percentage rates that are lower compared to what’s attached to your credit cards.
Funds for standing a business
If you have an idea for a small business but is having a hard time securing the funding you need through traditional loans, going the personal loan route might just be the choice for you. It could help get your venture off the ground. Once the loan is paid off, then you can just take another one if you have plans to expand. If you make timely repayments, your credit score might significantly improve which should give you the chance for a bigger loanable amount and even better rates.
There may come a point when you might need to take out a personal loan. Whether it is an emergency expense or a situation where you just need access to extra funds that you do not have, there are lenders willing enough to provide you with the money you need. Provided of course, that you are eligible and you meet all of the criteria they have set.
Why get a personal loan from a UK Lender
One of the best advantages of taking out a personal loan is that they can be used for just about anything. Unlike other types of loans where you are only allowed to use them for their specific purpose, you get a free rein on how you spend the money loaned to you by lenders once you get arrived. It could be an emergency bill, medical expense, funding for your holiday, or even paying off an existing bill.
Decide on the type of loan you need
When talking about personal loans, it usually means a loan that is unsecured and one that has a closed-end instalment term. To approve a potential borrower though, you will need to meet the credit score criteria that lenders have set. You may still take out one though even when your credit is bad but you are likely to be required by the lender to present some form of security to mitigate their risk. In this case, you can take out a secured personal loan where you can out your home or vehicle up as collateral to secure better borrowing rates.
Apply only for loans that you qualify for
Avoid applying for loans while just trying your luck. Remember that every time you apply for a loan, a hard check is done on your credit records and every time lenders do that, your score gets pulled down just a little more. Different lenders will have their own eligibility criteria for personal loans. Lenders will check your debt-to-income ratio. The lower the resulting numbers are, the more you may be allowed to borrow.
Know your credit score and improve it
Find out what your credit score is and if there are erroneous details on your record, be sure to dispute and correct that. Also, before you apply for loans, you can take steps to rebuild your credit such as paying your bills on time as well as paying off your debts to decrease your debt-to-income ratio.