With the tough times lying ahead, you want the most straightforward and easy way to get help at the time of need. Perhaps this is the reason personal loans are no doubt popular means of obtaining emergency funds. But with multiple types of loans available to choose from, the question you could be grappling with is, “should I go for a personal loan?”
There is no straightforward answer to this question since it all depends on your specific circumstances. There are times when unsecured personal loans are an easy and cheap way of getting emergency funds but it can also prove extremely costly if you are not careful. Therefore, it is important to consider your particular situation and compare the lending terms alongside other types of loans before finally deciding to go for it.
If you are having a matter that is pushing you to the corner, and you do not have any assets to serve as collateral, then a personal loan might just be your option. If you own a credit card that you can use to access financial help, again this could be your resort. The reason is card debts and withdrawals can be extremely expensive compared to a personal loan.
However, if you have shares, property, or such other assets, you could be better off taking a secured loan and not a personal loan. Secured loans come with lower interest rates since they are considered low-risk, at least because lenders know they can recoup their money by way of selling the property.
The other thing you want to take into account is your income to debt ratio. How does your income compare with your liabilities such as home loans, bills, and other miscellaneous expenses? By having a critical look at this ratio, you will be sure not to overcommit yourself to further debts, as failure to honor your repayments can not only risk your credit rating and assets but also comes with serious legal consequences.
Lastly, you do not want to borrow a personal loan to finance non-essential needs such as vacations. While a personal loan may be a good option in some cases such as meeting unexpected medical bills, loss of income due to loss of employment, it won’t make sense taking this type of loan to fund things you can do without. Ideally, you want to weigh your needs and situation against the cost of unsecured personal loans before you can finally sign up for any loan with a bank, credit union, or finance company.