There are many situations in life where you may need to call the bank to secure funding. Fortunately, these instances usually hold much lower risk and interest fees than short term or unnecessary personal loans. Included here are a few instances where taking out a loan could be a good idea.
Buying A Home
Only one-third of U.S. homeowners occupy residences that are fully paid off. This means most homebuyers, on average, will be securing a mortgage in order to buy their new place. Buying a home is a wise financial choice when it costs less than renting and you are planning to stay in the area for at least five years.
By shopping for a home that is less than 2.5x your yearly salary and has monthly payments of less than 25% of your income, you will be able to afford your home and stay above water. You will run into trouble when taking out a mortgage if you “buy more house than you can afford.” Pay attention to how much room for growth you need, but don’t overestimate.
Indebted American households carry approximately $15,000 in credit card debt each year. This results in excessively high interest payments and a nearly impossible hole to dig out of. A good time to secure a personal loan is when you need to consolidate credit card debt. Effectively, you are getting a low-interest loan, and using that money to pay off your credit cards. You will then only have one monthly payment that is likely less than all of the credit cards combined.
Emergency Home Repair
While it is advised that all American households save an emergency fund of at least $1,000 and put aside living expenses for at least six months, reality tends to differ from the ideal. Losing your hot water heater, roof or experiencing a burst pipe can radically affect your living conditions. In these situations, it is wise to take out a personal loan or home repair loan to fix it. One of the best ways to find a local expert who can fix your problem is to use the internet to search for “Home Repair Bergen County“, for example, and hire a handyman who is close to your location.
Some estimates show that as many as 44 million Americans do not have health insurance. This creates incredibly stressful lives where they face insurmountable medical bills for any accidents or health concerns. Taking out a personal loan to cover medical bills is always an option, preferable over refusing treatment.
Additionally, many hospitals and clinics will offer payment plans on your bill, with no interest for a set period of time. If you fall below a certain income level, you also may be able to have parts of your bill excused and overall payment reduced. If your medical establishment does not offer any of these options, personal loans are your best option; preferable over credit cards.