While credit cards are great for everyday expenses, it’s best not to carry a balance on them since the average interest rate can exceed 17% APR. If you are in need of funds and can only repay it over a certain period of years, a personal loan is your best bet, given that the interest rate is far more affordable. Let’s look at some good and not so good reasons to apply for a personal loan. 

Reasons to get a personal loan

• Home renovation: Home renovation costs like fixing a leaky roof, upgrading a bathroom, or remodeling your kitchen, can run into thousands of dollars. If you don’t have the required funds handy to finance the renovation, you can opt for a personal loan.
• Debt consolidation: If you have multiple credit cards with outstanding balances on which you pay a high rate of interest, you should consider taking a personal loan to consolidate your debts. Given that personal loan interest rates are a lot lower than credit card rates, you won’t be losing as much money paying the interest.
• Financing emergencies: You can also take out a personal loan to finance medical emergencies that are not covered by your health insurance plan. Sometimes, medical bills can amount to hefty sums that can be financed easily with a personal loan. 

Reasons to not get a personal loan

• To go on vacation: If you can’t afford to go on a vacation, you probably should not take a loan to pay for one. Remember that it is easy to spend the money you receive through your loan. However, you will need to continue repaying the borrowed sum along with the interest for many years. This could truly turn out to be a decision to live to regret. 
• Making investments: Many people take out personal loans to make investments, assuming they will be able to earn more than what they spend repaying the loan. There is, however, sadly no guarantee of how much you can earn on your investments. If your investments don’t perform well, you will lose the funds you invested and will also have to repay the loan amount along with the interest. 
• Financing a car purchase or tuition costs: If you are looking to purchase a car, you are better off taking a secured car loan. A car loan is secured against your vehicle, so it is likely that you will have to pay lesser interest. If you require funds for your college tuition, it is recommended that you opt for a federal student loan and not a personal loan, since student loans offer far more benefits to the borrower. 

It’s best to only apply for a personal loan if you have a genuine and clear requirement for funds. Keep in mind that you should also have a plan to repay the loan amount, without defaulting on any payments. Missing your payments could affect your credit score and make it difficult for you to get financing in the future.