Unlike what the popular consensus says, a loan is not necessarily a villain in financial life, and there are, yes, situations where making this “debt” can be worth it.

Below are five scenarios where you would have a perfect reason to take out a personal loan smartly.

Debt Consolidation

Dealing with multiple loans or credit card bills with varying interest rates and unpaid balances is a recipe for financial trouble. Therefore, debt consolidation is one of the situations in which taking out a loan can be a smart thing.

That’s because when you apply for a loan and use it to consolidate your monthly or overdue debts, you’re bringing all those outstanding balances together into one payment. This grouping of accounts makes it easy to set a deadline for repaying your balances without being overwhelmed.

Also, another advantage of using a loan to pay off your overdue credit cards or other higher-interest loans is the lower interest rates compared to the revolving rate charged by banks. And with lower rates, you can reduce the amount of interest you pay, and the time it takes to pay off debt.

Unplanned expenses

Probably the most compelling reason to consider a loan is if you’re facing an actual emergency or unforeseen expense.

For example, if you or a family member has been sick or seriously injured, the medical bills are beyond what you can pay. Or even in the case of a funeral – this is a sensitive subject, but it is a real and high-value expense that many people do not plan.

Unforeseen other orders may also happen, such as problems with the car, personal items (such as cell phone, computer), any dental emergency, etc.

These situations are difficult to plan for, and while a loan is not the ideal way to pay for these expenses (ideally having an emergency reserve), it is a necessary and worthwhile way in the end.

To earn money

Sometimes an opportunity arises to spend money to make money unless you don’t have money to spend. In that case, a loan might be a wise decision. Here are some examples:

• Are you looking to expand your business and secure greater profits;
• You want to renovate your house, which will increase its market value;
• You want to take a course that will enhance your career prospects.

In all these cases, you are taking a calculated risk. But even if things don’t go as planned, you will have tangible fruits from the loan you repaid.

Moving expenses

If you face a long-distance move, perhaps to a new job opportunity in another state or country, the costs may be high enough to justify applying for a loan.

That’s because having the money on hand will help you deal with all the unforeseen events and needs that arise at these times, such as moving your belongings from one place to another, regularizing documents, buying new furniture, transporting your vehicle, advancing expenses for rent, etc.

However, before taking out a loan to help cover these expenses, consider whether your new income will allow you to pay off your debt. This way, you avoid getting into debt that is difficult to get out of and not starting your new life and career with debts that will cause you stress.

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