Category: Personal Loans

Personal Loans

What can I use a Personal Loan for?

Most banks and building societies will offer personal loans. These are unsecured loans which means that you do not need to own a home in order to get one. This might seem like the loans are therefore for everyone, but they will do a credit check to decide whether they are prepared to lend you money. They do not check what the loans are spent on so in theory you can use them for anything. However, this may not be the best plan. There are some circumstances where it might be better not to use a personal loan.

Borrowing small amounts

If you are borrowing small amounts of money, perhaps even up to 35,000 then a personal loan may not be the best option. There are other forms of lending, such as credit cards, which might be cheaper. This is because personal loans can be expensive, as they are unsecured and they are repaid over a long time period. You might find a credit card with a cheaper interest rate or even one that has an interest free period for a while. If you do, then calculate whether it will be cheaper to borrow using this.

The main problem though, with a credit card, is that there are no rules about paying it back. You have to repay a small minimum amount each month but nothing more. However, you will need to make regular repayments, in the same way that you did with the loan, in order to make it a lower cost option. The quicker you can repay it, the cheaper it will be, so you will need to work hard to reduce your spending and increase your income so that you can repay it as soon as possible.

Repayments too expensive

It is also worth finding out how much the repayments will be. It is so important to make sure that you are easily able to cover the cost of these. Look at previous bank statements and think about how much you normally have left at the end of the month. Consider whether you would normally be able to afford the repayments. If you can, then great, you should be able to manage the repayments on the loan. If you normally could not, then you will need to look carefully at what you are spending to see whether you will be able to cut down anywhere so that you can afford to make those repayments. Then think about whether you would be able to cut down in the area for the whole term of the loan, so that you can always afford those repayments. It might seem like a lot of hassle, but for each repayment you miss, you will be charged a fee and these can add up and make the cost of the loan so much more expensive.

Costs too high

It is also good to find out how much the loan will cost you in total. This is good because you will be able to see whether you think that it offers you good value for money. Consider what you are using the loan for and whether you think that it is worth that extra cost. Imagine if you were buying those items at the loan cost and whether you would still buy them and think that they offered good value for money or whether you would avoid them thinking that they were too expensive. In cases such as these, finding a payday lender might well be a better option.

It can actually be quite scary looking at the total cost of a loan. It can be a lot dearer than we think form just looking at the interest rate. It is therefore a worthwhile thing to do as it will allow you to really understand what you will be paying back in total.

Unpredictable future

It is worth also thinking about what your situation might be during the term of the loan. If you think that you will still stay roughly earning and spending the same amount, then this is great. As long as you calculated that you could afford the loan repayments then you can apply with confidence. However, some of us have less predictable futures. It may be tat you job is not secure or that you feel your expenses may go up soon. In these situations taking on a loan may not be a sensible idea as you may not be able to manage the repayments.

Conclusion

So it is possible to use a personal loan for anything you like but it is worth being careful before you take one out. Make sure that it is the best option considering the amount that you want to borrow. Make sure that you can afford the repayments and that you will be able to do so in the future. Also find out the costs and make sure that you are happy that it will provide you with good value for money.