Why loan

Best for : Those looking to finance a small to mid-sized home improvement project or upgrade. Personal loan funds can help you move your household belongings from one place to another, purchase new furniture, transport your vehicle across the country and cover any additional expenses.

This way you can avoid raiding your savings or emergency fund. Best for : A long-distance move or those anticipating thousands of dollars in expenses. Surprise medical bills are another common reason to take out a personal loan, especially if your doctor requires payment in full. Takeaway : Because they can be disbursed so quickly, personal loans are a good way to cover an emergency or unexpected expense.

Personal loans allow you to purchase major household appliances and electronics immediately, especially if you need those appliances for regular use. Best for : Those looking to make a bigger household purchase now to save time and money in the future. Takeaway : A personal loan can help you get new appliances as soon as you need them. A personal loan is one way to cover the cost of a car, boat, RV or even private jet. Takeaway : Using a personal loan is better than depleting your savings or emergency funds when paying for larger expenses.

Takeaway : A personal loan can help you finance all of your wedding expenses upfront, which can help you avoid dipping into your savings or emergency fund.

Your average vacation might not cost enough to necessitate taking out a personal loan, but what about a honeymoon or a luxury cruise? While a personal loan is a useful tool to finance larger or unexpected expenses, there are some situations where it may not be the best option. Before applying, consider your financial situation and the reason for taking out the loan. The lower your credit score, the higher your interest rate could be. If you have poor credit, shop around for bad-credit loans , which cater to borrowers with a less-than-perfect score.

A personal loan also may not make sense if the loan is used for a purchase that would qualify for a better loan type, says Anastasio. Mortgages, car loans and student loans are all designed specifically to fund a particular expense and each come with features and benefits that personal loans do not offer. If you want a personal loan, you should compare multiple lenders to find the lowest interest rate. Start with your current bank and then apply with online lenders, local credit unions and other banks.

Most lenders will allow you to get prequalified, letting you see your potential interest rates and terms before you apply, all without a hard inquiry on your credit report.

Along with interest rates, you should also compare loan terms and fees. This will result in a hard inquiry on your credit report. For most lenders, this part of the process is quick; as long as you submit all relevant documents, you may be able to get your funds in a matter of days. Remember that no matter the circumstance, the loan must be paid back eventually. When you take out a personal loan to pay off credit cards or to throw the perfect wedding, you are borrowing money that must be repaid with interest on top.

Personal loans are a great way to consolidate debt and make major purchases, but you should always utilize this financial resource responsibly. How We Make Money. Brian Robson. Written by. Brian Robson covers topics relating to mortgages and first-time homebuyers as well as college students facing the difficult prospect of funding a higher education.

Edited By Aylea Wilkins. Edited by. Aylea Wilkins. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. Apply market research to generate audience insights. Measure content performance. Develop and improve products.

List of Partners vendors. A personal loan can be used for just about anything. Some lenders may ask what you plan to do with the money, but others will just want to be sure that you have the ability to pay it back. Though personal loans aren't inexpensive, they can be a viable option in a variety of circumstances. Here's how to decide if one is right for you.

Some kinds of loans are earmarked for a specific purchase. You can buy a home with a mortgage, purchase a car with an auto loan, and pay for college with a student loan. With a mortgage, your home serves as the collateral. Similarly, with an auto loan, the car you're buying will be the collateral. But a personal loan often has no collateral. Because it is unsecured by property that the lender could seize if you default on the loan, the lender is taking a greater risk and will most likely charge you a higher interest rate than it would with a mortgage or car loan.

Just how high your rate will be can depend on a number of factors, including your credit score and debt-to-income ratio. Secured personal loans are also available in some cases. The collateral might be your bank account, car, or other property. A secured personal loa n may be easier to qualify for and carry a somewhat lower interest rate than an unsecured one. As with any other secured loan, you may lose your collateral if you are unable to keep up with the payments.

Even with an unsecured personal loan, of course, failing to make timely payments can be harmful to your credit score and severely limit your ability to obtain credit in the future.

Before you opt for a personal loan, you'll want to consider whether there may be less expensive ways you could borrow. Some acceptable reasons for choosing a personal loan are:. You might also consider a personal loan if you need to borrow for a fairly short and well-defined period of time. Personal loans typically run from 12 to 60 months. So, for example, if you have a lump sum of money due to you in two years but not enough cash flow in the meantime, a two-year personal loan could be a way to bridge that gap.

Here, for example, are five circumstances when a personal loan might make sense. If you owe a substantial balance on one or more credit cards with high interest rates, taking out a personal loan to pay them off could save you money. For example, as of this writing, the average interest rate on a credit card is That difference should allow you to pay the balance down faster and pay less interest in total.

Plus, it's easier to keep track of and pay off a single debt obligation rather than multiple ones. However, a personal loan is not your only option. Instead, you might be able to transfer your balances to a new credit card with a lower interest rate, if you qualify.

But with double-digit inflation and other issues, sometimes the marriage expenses corpus is not adequate. For grooms, there is hardly any money saved especially if they are marrying at a relatively younger age.

With the cost of weddings today higher than 10 years ago, financial help during marriage is a given. Most people do not ask for money help from family and friends. Instead, they take a personal loan. Taking a good amount of personal loan aids them in using it for marriage expenses, honeymoon trip and for setting up their new place. For borrowers who have a regular stream of income, taking a personal loan for a wedding and repaying the debt from salary makes good sense.

Using a credit card or taking a loan from neighbourhood moneylender is an expensive proposition. Instead, apply for personal loan with a tenure of 5 years and slowly repay the loan at your comfort and convenience. Toll Free No - Email - Banker idfcfirstbank. Toll Free No - Email - Customer. Care Capitalfirst. We have unlocked access to our new exciting banking portal for all customers who opened their accounts after December 15, We will have the new portal unlocked for you too shortly.

Meanwhile, please continue using our existing portal to manage your account. Home Knowledge Resouces. Top 6 reasons to apply for a personal loan.

Debt consolidation Many borrowers have a loan problem. Paying credit card loan Credit card loans are costly. Can't ask relatives or family for money Many borrowers come from well to do families.

When buying a home It's a well-known fact that a home loan covers 80 per cent of the house cost. Medical emergency You may have a solid medical insurance policy but that does not mean you are per cent covered.

Wedding purpose Parents save for their daughter's marriage. X For Media Contact Ms.