There are various circumstances where personal finance can be a feasible alternative. But, do you exactly know what personal finance is?
Some of the finance options are earmarked for a particular type of purchase. For instance- through a car loan, you get funds to buy a car. Through a mortgage loan, you can buy your new home. Through a student loan, you get funds for paying your college fee.
However, personal finance is flexible when it comes to usage. You can opt for this loan for almost anything unless obviously it’s illegal. And cherry on the cake, there are various banks and financial institutions that offer personal loan in UAE without a salary transfer as well as with a salary transfer.
In terms of those earmarked loans, the specific purchase like your car or your house act as the collateral. On the other hand, a personal loan does not have any collateral. And, being unsecured it may come with higher rates of interest.
Let us discuss a few situations where going for this loan can turn out to be an ideal solution.
1. When it can be used for making money
You may come across a few opportunities where you can earn money by spending it. However, the only problem is you do not really have enough money. In such a situation, going for a personal loan is the most viable decision. Let’s see what some of these situations can be.
- Going for further studies to support your career further.
- Making payment for home renovation, which will add up to the value of the house.
- Financing the expansion of the business, which in turn will allow you to earn more profits.
Obviously, this involves a certain amount of risk along with the chances of you losing the money. It is not necessary that courses lead to an improvement in your future, renovating your home will increase its value, and expansion of business always work successfully.
You may end up getting stuck in clearing off your loan without having enough to present for it. That said, after enough research and assessing the chances of the opportunity being in your favor, going for the loan may be a good option.
2. When it can be used to finance your purchase
Getting finance for your purchase is dependent upon whether that purchase is a need or a want. If you plan to opt for a loan anyway, then obtaining a loan and making the cash payment to the seller is a better option than financing from the seller.
It is suggested that you never take a financing decision impulsively. Ask your seller about what all offers they provide and then make a comparison with the loan option. You can then make the appropriate choice.
3. When it can be used for consolidating debts at lower rates of interest
Out of various reasons for obtaining this loan, the most popular one is debt consolidation. The borrowers usually opt for this loan for the consolidation of the debt on their credit card. However, it can also be used for clearing off your other loans with higher interest rates, like student loans refinancing for people with multiple student loans.
Let’s see how it actually works. You go around shopping for loans for the consolidation of debts and obtain one equal to the amount of debt piled up. As soon as your loan gets approved and the funds are disbursed, you can clear off your entire debt through that loan.
This will leave you with only one payment to make monthly as opposed to several, and will also allow you to save on interest amount. With the loan tenure, you get a defined timeline for clearing off your debt. This will assist you in balancing your debt if you have been stuck in a debt cycle like that of a credit card.
If you have been looking forward to debt consolidation, ensure that the funds you will be saving through this consolidation are higher than the fees and charges you will have to pay, such as processing fee.
4. When it can be Used for Credit Improvement
Here are three ways in which this finance can assist you in improving your credit score.
- Firstly, it may assist you in reducing the credit utilization ratio. This ratio is the total amount of credit you are using in comparison to your credit limit. Lower the amount you use out of your total credit, the better would be your rating. Holding a personal loan in your name adds up to the entire amount accessible to you.
- Secondly, in case your credit report consists of debts on credit card more, this loan may help in adding “variety” to your report. This variety in loans or debts is sometimes good for your score.
- Finally, if you make the payment of your loan on time, it is obviously favorable for your credit rating.
5. When it can be used for a wedding
This type of loan is an ideal option for funding large events like a wedding. Opting for this finance to fund your or your child’s wedding or any other big event may help you in saving a good amount of funds on interest charged.
You must, however, check whether you can make the payments related to the event through your credit card or not. You must also see if the interest rate charged on the personal loan is lower than the percentage charged on your credit card.
6. When it can be used for making instant payments on emergency expenses
You may face situations where you do not have a sufficient amount of funds for affording an expense, which has to be met instantly, otherwise, you will have to bear the consequences. These circumstances may include-
- The payment for repairs and renovations at home for maintaining the house.
- The payment of medical expenses, which gets transferred to collections and harm your credit in case of non-payment.
- The expensive repairs on your vehicle without which it becomes difficult for you to travel from one place to another.
This loan option might not be the best way of making payment of these expenses. Emergency funds can probably be a good option. However, when you come across an expense that is higher than what you can afford, and you are not left with too many alternatives to choose from, then, personal finance can be a suitable solution that wouldn’t charge a very high amount of interest from you.
In a Nutshell!
These loans can turn out to be useful keeping in mind the situation in hand. For instance, a lot of people are unable to afford cash payments for home renovation, or their dream vacation, or college fee. With platforms like P2P funding, these people take the support of personal finance to meet their financial requirements.
Make sure you approach only trustworthy and authentic lenders like QVCredit if you are Singaporean, and weigh the alternatives carefully. After this, you can choose the most suitable option and apply for the loan. Upon approval, the funds are available to you almost instantly.
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