We were taught from a young age that if we want something, we need to patiently work hard to achieve it. As adults, however, we will inevitably be confronted by financial goals that simply can’t wait. There are avenues that you can turn to when you don’t have enough funds and you have a pressing deadline for your needs and wants. A personal loan is one of these.
Generally speaking, applying for a personal loan refers to borrowing money from a lender without necessarily putting up collateral. The lender can be a bank, a credit union, or even a peer. Because the loan doesn’t come with collateral, most lenders consider personal loans to be high risk, which means that prospective borrowers must undergo thorough screening. A borrower must be seen as creditworthy before their application is approved, and even then, they usually have to deal with higher interest rates.
The process is worth it, though, as there are many advantages to getting a personal loan. You can use the amount you borrowed for just about anything, upon the condition that you will pay back the full amount, including interest, within a certain period. At the same time, you may also be compelled to use the amount for a specific purpose if you applied for bank loans. Philippine banks may offer specific loan options for purchasing real estate or vehicles, for example.
You can use just about any reason to take out a personal loan, but when is a personal loan a smart financial option? Here are a few circumstances where applying for a personal loan may be the best course of action:
Medical emergencies
Many financial experts advise young working professionals to start building an emergency fund as soon as they start earning their own money. An emergency fund provides a bit of security in cases of medical emergencies and financial difficulties. However, saving money can be more difficult than it looks, and medical emergencies don’t always give a forewarning. If you’re expecting that your or your loved one’s urgent medical needs will exceed the costs covered by your health insurance and other benefits, consider getting a personal loan to help with your finances. Think of the loan as an investment that will go towards the patient’s health and well-being.
Business opportunities
One of the most common roadblocks for would-be entrepreneurs is the lack of capital for their dream business. Many people plan on starting their business after saving up, but this can take a long time. If your business can’t wait, then why not take out a personal loan that you can use to set a solid foundation for your budding company? Many Filipinos are open to this idea. In fact, a 2017 survey by the Bangko Sentral ng Pilipinas reported that 31 percent of borrowers take out loans to fund their business. You can do the same if you’re planning on expanding your facilities. Do note, though, that many banks also offer loans specifically designed for commercial enterprises. Be sure to compare your options so you can find a loan program that’s best suited to the needs of your venture.
Educational expenses
The money you spend on educating yourself is an investment for the future. If you’re planning to further your education and improve your career, then you’ll likely need additional funds. You can use the amount to pay for your tuition, to support yourself while you’re focusing on your studies, or to ease the stresses of juggling your professional, financial, and academic responsibilities all at the same time. If your loan will go towards your education or that of your loved one, try to look for a personal loan program that offers low interest rates and a fixed repayment term.
Home improvement
Your home may have incurred significant damages due to fire or flooding. Now, it can be a challenge to start picking yourself up again if what used to be your safe space no longer feels safe and secure to you. Begin your path to recovery by taking out a personal loan to rebuild your home. You’ll likely find it easier to move again once your home condition has improved or once it’s back to how it used to be.
Debt consolidation
Being indebted to multiple lenders is a stressful affair, as you’ll have to take note of different due dates, interest rates, and other details. To reduce the amount of stress that you have to deal with, you can take out a personal loan to pay for all your other pre-existing loans. Instead of dealing with multiple lenders, you only have to be mindful of one. This, in turn, can give you peace of mind and let you focus your attention and energy on making enough money to pay off your balance.
It’s easy to apply for a personal loan, but before you submit your application, carefully consider if the funds you borrowed will be used for a good cause. It’s also a smart idea to shop around for personal loan programs and check the ones that are suited to your circumstances before you sign the dotted line.
