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Avoid the Pitfalls of Personal Loans

In many cases, simply saving and cutting back on expenses will not do the trick when it comes to getting out of financial stress. Sometimes, a personal loan can be just what the doctor ordered. Before applying for a loan, though, it’s wise to have a game plan in place dictating how to best use a personal loan.

The Decision is Ultimately Yours

Yes, it’s summertime and a vacation sure sounds good. But, you should remember that a personal loan is actually a financial tool that needs to be used responsibly and for good reasons. The lender may even put specific parameters in place as to how the loan will be used.

Great Uses of Personal Loans

Many financial advisers will tell you that taking out a loan for something that will rise in value is a good use of debt. Examples of this include:

  • Education expenses that will increase your earning power
  • Renovations for your home or even purchasing a new home
  • A debt consolidation loan that will bundle your debts into one neat package that lets you pay just one monthly bill rather than many

Poor Uses of Personal Loans

For people who already have problems with unnecessary spending, a personal loan can turn into a bit of a crutch. Such persons may look at the loan as a means to increasing their purchasing power of unnecessary stuff. Examples of bad uses of personal loans include:

  • Vacations
  • A lavish wedding
  • More stuff for your home or auto

What to Take Into Account Before Applying for Personal Loan

Because personal loans are usually unsecured – meaning you don’t have to put up any collateral – the temptation to spend the funds on stuff you don’t need can be enormous. Things to consider include:

  • Interest rates – a personal loan with a lower interest rate as well as a shorter term mean you’ll keep down the additional monies owed to the lender
  • Terms – ideally, you want to go with a shorter term loan over a long term loan because you’ll end up paying less in your total interest charges
  • The lender – do a bit of homework on the lender and pay especially close attention to any customer reviews

In a Financial Bind? Call The Oswalt Law Group

There are many alternatives to bankruptcy, and personal loans taken out for the right reasons are among them. To get a bird’s eye view of your situation so that we can help you eliminate that crippling debt, call The Oswalt Law Group for a free consultation. Our number is (602) 225-2222.    

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