While most of us would prefer not to carry debt, there are times when it’s unavoidable. That’s when smart consumers will investigate options: Sometimes a low-interest credit card will work, but at other times, a personal loan may be the best choice.
According to CNBC, personal loans often act as a “placeholder” for those with a big upcoming expense but little in the way of savings. They do not require borrowing against something of value, such as a house or car.
“From a financial responsibility standpoint, it feels like a semi-savvy way to take on debt,” says Bankrate’s personal loans expert Todd Albery.
There are a number of situations when it would be wise to obtain a personal loan, notes credit.com. Here are the top four:
First, to Save Money: If you qualify for a personal loan at a lower interest rate than what you are currently paying on your credit cards, you can save money. For example, you might have a $5,000 credit card balance at 21.99 percent. If you can refinance with a personal loan at 12 percent, you will save about $500 in the first year.
Second, to Get Out of Debt: Most personal loans are installment loans, which means they carry a fixed repayment period of two to five years. As long as you can make those payments each month, you’ll know exactly when you will be out of debt. Plus, when you borrow on a personal loan, you can use it to completely pay off all other balances.
Third, to Boost Your Credit: While there are no guarantees, it’s possible to build better credit with a personal loan by boosting your mix of credit. The different types of credit in your report will improve your score. The presence of both revolving and installment debts is a good sign you can handle different kinds of debts.
Last, to Help in an Emergency: If your car needs to be repaired or maintained, you can use a personal loan to cover the expense. Or maybe your filling came loose and the toothache pain is overwhelming. People are using unsecured personal loans to help them with emergency expenses.
According to Forbes, one out of ten consumers plan to borrow a personal loan in the coming 12 months. If this seems like an attractive option, perhaps the first and most important factor to consider is finding a reputable company.
A slew of online lenders, like Lending Club and Prosper, have emerged in the U.S. in recent years to offer these types of loans as the alternative, particularly for millennials, who want to consolidate their debt but don’t have the home equity for a secured loan to do it.
In Canada, SkyCap Financial is one personal loan provider that borrowers can choose from. Based in Kingston, Ontario, SkyCap Financial is a member of Smarter Loans, which connects Canadians to the most trusted lenders in the country. Companies listed with Smarter Loans have been vetted by financial experts, including journalists and industry professionals. The platform provides important details about lenders, including types of loans offered, conditions, rates, repayment options and more.
In addition to its lending services, SkyCap Financial offers SkyCap University, a free online course aimed at improving financial literacy for SkyCap Financial clients. The course covers several basic financial topics such as creating a budget, dealing with credit and loans, and preparing for retirement.
U.S. News and World Report published a list of best lenders in 2019 if you need more information.
To find best rates and other company details in Canada, you can check out Smarter Loans loan directory.
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