All of your dreams can become a reality if you have enough money. That’s what everyone dreams of before going to bed. Sometimes, you pillow talk with your significant other about all of the good things you’re going to have when you get the next promotion or when you win the lottery.
Another time when money imagination can take hold of you is when you’re on vacation, and you want it to last forever. That’s why loans are such a nice addition to society. They let you have the money you’ve always dreamed of and with minimal consequences. Click here to read more.
The only bad side to loans is the interest that you’ll need to pay over time. But you don’t feel that money slipping away as much as you feel the initial outburst of happiness when you see six digits in your bank account. That’s one of the reasons why so many people take out personal loans.
You can use them for a multitude of purposes. First of all, you can take out a personal loan to pay off other types of debt that have piled up. Another use of this financial instrument is to get a dream installment in your home, such as a new patio, a pool, or renovating your entire bathroom. The motives are completely your own, and you can use the money for what you see fit.
What are the types of loans?
There are two main types of loans. The first type is unsecured. This is when the bank or the lending institution can’t take anything away from you apart from decreasing your credit score. No one can come and take your house and your car.
But this doesn’t mean that the consequences of running away from responsibility are not there. The first thing that will take a major blow is your credit score. This means that you could go into default. You don’t want to be in this position since it can impair your entire life.
Raising your score back to the level that it used to be can take anywhere between seven years and a full decade of responsibility and not miss a single bill payment. You can go to billigeforbrukslån.no to read more. You don’t want that to happen to you. The other form of loans are called secured.
This is where the lending institutions can come and take your car, boat, or house if you don’t have enough money to repay them back. That’s why there are specific loans that go into getting a car or a house. Mortgages, for example, help you get the house that you’ve always wanted.
You go to the bank, and they buy the house you wish, and you start living in it. Every month, when you pay back the bank, their share of the property decreases, and your share of the property increases. Over the course of twenty or thirty years, you will repay the piece of real estate completely, and it will be listed in your name. If you fail to do so, then the bank will take it back.
Why would someone want to take out a personal loan?
There are numerous reasons as to why someone would need extra money at the moment. Since you can use the cash for anything that you see fit, the requirements can be quite diverse. As long as you stay within the parameters of the loan, you can do anything you want, apart from going to college, gambling, or doing illegal things.
There are special financial instruments dedicated for going to college. Gambling is something that doesn’t bode well with the bank. Finally, illegal things will get you in trouble with the justice system. Think of these three niches as off-limits.
Cash in case of an emergency
Sometimes, you don’t have enough cash to cover for an emergency. No one takes emergencies into account when it comes to monthly financial planning. Instead, most people follow the 50/30/20 strategy.
This means that most people spend 50 percent of their income on their needs, which includes rent and groceries. Then, they spend 30 percent of their earnings on wants, which means new clothes, a new phone, or going out for dinner on lunch.
Finally, the last 20 percent of their income gets invested into the stock market, an IRA, or cryptocurrencies, which is a new trend. This leaves no money to handle emergencies. However, this doesn’t mean that certain situations never happen. Sometimes, you get sick and need to go to the hospital.
The healthcare system is quite expensive, and expenses can add up quickly. If you haven’t anticipated it, or if you don’t have insurance, then a visit to the doctor can be quite costly. Next, come unexpected car problems. Everything seems normal for a few months, and then, out of nowhere, your car breaks down completely.
No one has enough spare money lying around to be able to afford a new car or handle defects. This is when a personal loan would come in handy. This is a much better option than going for a payday alternative, which completely eats up your next paycheck, and has incredible interest rates that could reach 500 percent in some situations.
Most borrowers don’t have enough money to cover the financial resources needed for that kind of alternative, and that’s why going for the personal route is much better.
Here’s an interesting fact. The debt of the United States has increased. Now, you might be thinking to yourself that this information is not something new. Everyone knows about it. However, that’s not true just about the government.
Instead, the debt of the average American has increased. The collected credit card debt of individuals has crossed one trillion dollars. That’s a lot of money. Here’s why that happens. A lot of people don’t know how to use their credit cards.
They think of these small plastic cards as a source of infinite money, and they don’t care when they go into the negative digits. This is not something that people should feel proud of. The interest on credit cards is quite high, and it can reach close to 20 percent.
That’s a lot compared to other types of loans, where it could be 6 or 7 percent. That makes a drastic difference over time. Nowadays, the percentages have dropped as low as 4 percent. This means that whenever you get in trouble with your credit card, instead of paying double or triple the money, you can borrow money and return it at a much lower rate.
Repairs and improvements
When it comes to doing repairs and improvements on your house or apartment, it’s much better to do everything all at once. If you’ve ever lived in a house, then you probably know that the work around it never stops.
There’s always something new that needs to be fixed, and it often takes weeks, if not months, to take care of it. Most people spend their weekends doing DIY projects when it comes to painting or making some woodwork to fix up the roof.
That takes too much time away from your weekends, and it adds to your stress. There’s always the work that’s hovering over your head like a dark cloud. Instead of spending months trying to fix up everything all by yourself, you can go for another option, which is taking up some money beforehand and fixing all of the problems all at once.
This is a bit counterintuitive for a lot of people, even though it makes the most sense. Sure, you’ll pay a bit of interest over time, but you will be completely at peace, and the work that you had anticipated will last for months, will only take a few weeks at most.
This is a much better option than going for a line of credit or a home equity loan, which forces you to put your piece of real estate as collateral. You don’t want to be losing your property due to one missed payment. That’s why going for the personal route makes a lot more sense.
Plus, it’s much faster to pay it off, with a lot less paperwork. On the same topic, this is a great thing to do if you’re moving to another city in search of a new home. Instead of going for multiple trips, you can rent out the services of a company and transport everything in a single trip.