There is a range of financing options available to you should you need them, and personal loans are just one of many. So, in which situations should you consider a personal loan and when should you avoid one? Find out below:
Personal loans are one of the most popular ways to fund home renovations, as it allows you to quickly access financing for a particular renovation project and pay for it within a short period in easy repayments. A personal loan can be great for major home renovations such as upgrading your kitchen or bathroom, improving your floor or decorating, building, painting, reconstruction and making fixtures and repairs without straining financially. Approval for a personal loan is usually much faster, as there is a lot less documents required. The personal loan would also be a short term debt, meaning that the costs involved may be lower than those involved in accessing your home equity.
Yes, it can. For example, if you are applying for debt consolidation you may already appear to be a higher risk than someone who is buying an asset, such as a car, or someone who is investing in their property by undertaking renovations. However, it depends on how the lender assesses your application's risk. Ultimately, your eligibility will come down to whether you meet the lender's application criteria and whether you can afford the loan.
While many loan purposes are acceptable, some are not always advised. Here are some situations where you may want to reconsider your loan application:
If you can easily save the money. Want to take a holiday or buy a new lounge, but it isn't urgent? A personal loan may not be the best option. Work out how much your repayments would be and save that amount each month instead. If you can't wait that long to do what you're planning, save instead.
If it's a bad investment. Are you thinking of taking out a loan to undertake home renovations or some other investment? Make sure the investment will add value rather than take it away, otherwise you'll be repaying your loan on an idea that lost money.
If your income and employment aren't stable. You should not take out a personal loan unless you are in a stable financial position. If there is any reason why you think your income or employment situation might change for the worse, don't apply for a loan.
Reference: https://www.finder.com.au/personal-loan-uses
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