When To Get a Personal Loan and When Not To


When to get a personal loan? If you believe all the ads, anytime! The pressure to take out loans is everywhere. But beware. While loans can be quick and easy to get, they can be slow and painful to repay. United Financial has guidelines to help you figure out when to get a personal loan and when not to.

Not all loans are alike, so let’s first be clear about what a personal loan is. Mortgages, car loans and student loans are all specialized loans. They restrict what the loan can be used for. Personal loans are not as restricted.

For those times you need extra cash but your need doesn’t fall into the specialized loan categories, that’s when to get a personal loan. You might have seen some of the reasons people take out loans in all those promotions: vacations, weddings, or a “whatever-you-want” loan.

Up close and personal

Your personal reason is only limited by your imagination. United Financial doesn’t want to judge the worthiness of your reason. But we do want you to make a sound financial decision regarding when to get a personal loan. Here are a few considerations before you sign on the dotted line:

Need or want?

It helps to be clear whether your reason addresses a true need or if it’s only something you want. A need implies urgency. You’re facing a crisis that must be addressed immediately. When you’re in a tough spot—that’s when to get a personal loan.

A want, on the other hand, isn’t a crisis. Before taking out a loan to cover the cost, consider whether you could wait and save up for it. Paying cash for wants is always preferable to borrowing. Sometimes it is okay to make an exception. Just keep in mind that not every want is an exception!

Type of personal loan

You need to be aware of the two basic types of loans: secured and unsecured. Although secured loans generally offer lower interest rates, you put up collateral to secure it. Should you default, you could lose your car or other asset. Unsecured loans can be worth the slightly higher interest rate, which are typically still lower than a credit card.

How much to borrow

Remember that all loans have long-term financial consequences. Just because you can borrow money doesn’t mean you should. And just because you qualify for a $10,000 loan, doesn’t mean you should borrow the full amount.

You know what you can comfortably afford to pay back in monthly installments. Never let a financial institution talk you into borrowing more than you need. More isn’t always better. Try to keep the amount of the loan as small as possible and the repayment length as short as possible.

Although any reason might be good enough for financial institutions to approve a personal loan, you still have to qualify for one. You need a good credit rating in order to get a personal loan. That might not be what you want to hear, but if your credit rating isn’t good, a personal loan might not be an option for you.

You might need a loan if …

Ideally, you have a savings account with a healthy balance. You also have a rainy-day fund for emergencies. You have a credit card that you only use for occasional large purchases and pay off the balance every month.

But life is rarely ideal. Sometimes you can have a run of bad luck. The rainy-day fund has dried up. Your credit card balance has crept up higher than you’re comfortable with. And the bad luck has continued.

  • Car repair. When you need a car to get to work, you can’t wait to save up the money you need to get it fixed. You need to keep your job. It makes sense to take out a personal loan to get back on the road and protect your income.
  • Replacing appliances. A refrigerator that no longer keeps food cold is a health hazard. A hot water heater is essential. You can’t live in a house without a functioning furnace in the winter.
  • Paying off debt more quickly for less. Your credit cards are maxed out; you wonder if you’ll ever get them paid off. A personal loan can help, but you need to crunch the numbers first. An unsecured personal loan at United Financial could lower the interest rate you pay on your debt. Transferring your balance or consolidating your bills with a personal loan could save you money.

Just make sure that you don’t start racking up debt on the credit cards you just paid off. Financial gurus often advise against incurring debt to pay off debt. It’s true that transferring your debt to lower interest loans is smart. But unless you address the reason you got into debt in the first place, you could end up in financial trouble again.

So, when to get a personal loan? When it makes financial sense!

You might want a loan if …

Sometimes it isn’t life’s emergencies that prompt you to borrow money. When to get a personal loan often includes some of these happier or more fun reasons:

  • Weddings. It’s easy to get caught up in the excitement, so it can pay to plan ahead and set up a savings account to pay for your big day. With or without a loan, you should have a budget to help hold you accountable for your expenditures. Pay cash for as many of the expenses as you can. Take out a personal loan only for the bigger expenses.
  • Vacation. There are vacations, and then there are dream vacations. A second honeymoon to celebrate a fiftieth wedding anniversary qualifies as a “once in a lifetime” event. Just remember, when the vacation is over, you have a loan to repay. Don’t turn your dream vacation into a burden by taking on more debt than you can afford.
  • Home improvement project. If you’re reluctant to put your house up as collateral with a home equity loan, you might consider a personal loan to upgrade the siding or update the kitchen. When your improvement increases the value of your home, taking out a personal loan can be a smart decision.

There are plenty of other good reasons when to get a personal loan: paying high rate credit cards, expanding a small business, or paying off a medical debt are just a few. We simply suggest that you explore all your loan options first.

What are your personal loan options?

When family and friends are unable to loan money to you, that’s when to get a personal loan from United Financial.

When taking on additional high-interest credit card debt doesn’t make sense for you, that’s when to get a personal loan from United Financial.

When you want to take advantage of an opportunity of a lifetime, that’s when to get a personal loan from United Financial.

United Financial provides personal loans to get you through life’s emergencies. And we’re happy to help you celebrate life’s joys.

Stop in to any United Financial branch office and talk to one of our loan officers. We can help you sort out your needs and wants, and then help you find a way to meet them.