Most people in South Africa view personal loans as something that can be used to repair credit. The reason for this is simply that many debt counsellors advise debtors to use personal loans to cope with missing monthly payments. However, a personal loan is much more than an instrument for dealing with existing loan defaults.
Personal loans can be used for multiple purposes, apart from just credit rebuilding. In fact, personal loans are ideal solutions to any individual who has an immediate need for a cash infusion brought on by emergencies of various types.
For example, you can use personal loans if you have plans to go on a holiday but do not have enough money to spend, need medical attention but do not have liquidity options, or to even buy gifts when you do not have enough money in your account.
However, most experts would tell you that personal loans can turn out to be a boon for you or a bane for you, depending upon how you use them.
Here is an analysis of personal loans being both good and bad options in an emergency.
- Good option:
here are many benefits of getting a personal loan to deal with emergencies. The foremost of these is the fact that a personal loan would allow you to plug any gaps in your finances with minimal effort and in the shortest of time.
In addition to this, you can even get a personal loan without putting up collateral which makes them a very good option if you do not have any fixed assets to put up. Also worth mentioning is the fact that a personal loan is a good option because of the simplistic application process that it boasts of.
- Bad option:
The main reason why a personal loan being used in an emergency situation can be a bad option is the interest rate that is attached to it. Personal loans, on a general basis, have high interest rates that if allowed to affect the situation can result in major financial damage for people who have taken them out. H
owever, it is possible to counter the interest rates that personal loans are hamstrung with if you were to clear them as soon as possible. If the personal loan does not stay active for a long time then the interest rate would not have time to affect the final amount owed.