6 Good Reasons to Apply for a Personal Loan
Published: March 6, 2020
Categories: Personal loans
Tags: Responsible lending, Small Loans, Types of Loans
Tough financial times, economic recession, cash crunch and too much month left at the end of your money are concerns that millions of South African consumers are faced daily as they struggle to make ends meet. Taking out a short-term loan or other forms of credit or lending may solve an immediate money predicament; however, it is important to do so responsibly.
Bayport South Africa encourages consumers to stay on the good side of credit.
Tessa Verwoerdt, HOD: Money Solutions at Bayport says anyone considering should ask themselves some primary questions before applying for a personal loan:
- What is my reason for borrowing money?
- Is it worth getting a personal loan to pay off debt?
- Can I comfortably afford to make the monthly repayments?
- Is now the right time to take out a loan?
- How secure is my job?
- What other financial commitments do I have?
- Is there any other way in which I can make more money to avoid having to take out a loan?
- How will the personal loan affect my credit record?
- Do I earn enough money to afford a personal loan?
- Do I have a good enough credit score to quality for a personal loan?
- Am I considering borrowing money from a registered responsible credit provider?
Verwoerdt offers responsible lending advice for taking out a personal loan for the right reasons:
First and foremost, borrow only as much money as you need and whenever you have some extra cash, put it towards paying off your debts. Why? If you repay the loan off quicker, it will cost you less because of the interest you save. What’s more, it can positively impact your credit score. Other noteworthy points are:
- Consider consolidating your debt
Debt consolidation means that you combine all your debts, such as car loans, credit cards and payday loans, into a single loan with a fixed rate, fixed monthly payment and fixed term. Consolidation is not only necessary when consumers are financially distressed. Any disposable income can go into savings or towards paying more into your debt to reduce the term and reduce the amount of interest paid.
- Prepare for the unexpected
Unplanned emergencies happen and there should be contingencies in place for unexpected expenses like funerals or medical costs. Most people can’t easily include these expenses in a regular monthly budget, and often, the costs are unknown. Taking a personal loan for an unforeseen cost can help you to deal with these unforeseen emergency expenses.
- Create a good credit record
If you have no credit history, you could consider applying for a small personal loan to boost your credit record. Just like personal credit scores, the greater the number of creditors which report a good payment history, the better the credit score will become.
- Invest in your own business
A loan may allow you to grow your business. You can secure a loan to add value to your business by purchasing equipment that will increase productivity levels.
- Improve or renovate your home
Whether you want to renovate, improve or extend your house, a personal loan is a great option if you don’t have funds available on your home loan provided that you are able to make the monthly loan repayments without placing yourself under more financial stress.
- Invest in your education
With the rising cost of education, study fees can be expensive. Taking out a personal loan to further your education is considered “good debt” as investing in education can pay off throughout your life by increasing your lifetime earning potential. Alternatively, a good education is a solid foundation for your children’s future.
Verwoerdt concludes that some reasons are better than others when it comes to borrowing money. “The bottom line is that you should never borrow money when it is not necessary and when you cannot afford to honour the monthly loan repayments comfortably. If you want something rather than need it, the reason is probably not good enough.”
If you feel that you have a good enough reason to take out a loan application now, and believe that you borrowing money responsibly, then you can start your online loan application to find out what you quality for and what interest rate you will pay, and then make sure that this suits your personal budget comfortably without placing any more financial stress on you.