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5 Great Reasons to Take Out a Personal Loan

Posted September 13th, 2010
by Staff

Personal loans, in many ways, are kind of the catch all of the money lending industry. You can take out a personal loan for just about any reason. Depending on your credit, you may be able to take out secured or unsecured loans, and you can take out short term or long term loans for small or large amounts of money.

Like any other kind of credit, there are good reasons and bad reasons to take out personal loans. Most of the “bad” reasons are fairly obvious. Let’s face it, there are some things in life you just don’t need if you can’t pay cash for them. Here, on the other hand, are some good reasons for taking out a personal loan:

  1. Debt consolidation. If you have a lot of little payments going out hither and yon, it can be a very good idea to take all of those debts and lump them together, giving you one payment to deal with. Many times the interest rate on a personal loan will be lower than other types of credit and you can save yourself a bundle in payments.
  1. Buying a car. We know, most of the time when you buy a car, you use an auto loans. Auto loans are essentially large secured personal loans, with the car itself as collateral. Using an actual personal loan instead can benefit you in that you don’t need to use the car as collateral. This is especially beneficial if you’re buying an older used car because you won’t need to invest in full coverage insurance, which adds a lot to your bottom line every month.
  1. Other large ticket items which you can’t wait for. It’s often better to wait and save for something when you can, but there are times in life when we actually need something. If your lawn mower breaks, it’s not like you can let the grass grow for two years while you save for a new mower. You need one now, and a personal loan will usually offer you better terms than in house financing.
  1. To build your credit score. This is especially useful if you’re in the process of rebuilding credit. Of course, if your credit score is low, you might need collateral or a cosigner, but regularly repaying a personal loan can cause your credit score to grow by leaps and bounds.
  1. To establish rapport with a bank. Similar to building credit in general, establishing rapport with a bank or other lending institution can pay off big time in the long run. Once a bank has seen you handle small personal loans responsibly, they are more likely to look at you favorably when it comes time to take out a larger loan. The last thing you want is to be shopping for a house or other large ticket item, and have no established credit relationships.



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