Taking out a loan is a good way to manage your money if you have an expensive purchase that needs to be made. Apart from mortgages, the top five reasons for taking out a loan range from the mundane to the pleasurable. Providers sometimes ask you the purpose of your loan, depending on the amount you're asking for. Large loans often have to be offset against your assets to give the loan provider a measure of protection should you default on the loan at any time. So what are the top five reasons for taking out a loan?
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Debt consolidation is one of the major reasons cited for requesting a loan. By taking out one single loan and using it to pay off other, more expensive debts, you can save yourself a considerable amount of money in interest payments over the course of a year. It can also simplify your finances, meaning only one monthly repayment instead of juggling several at the same time. During tight financial times debt consolidation loans have become very popular, but do read the small print and do your calculations to make sure that you do not actually end up paying a higher single interest rate than you would if you totaled up all your smaller debts.
Home improvements
The second most popular reason for taking out a loan is to carry out improvements on your home. Now that many people prefer to stay in their homes rather than risk the fluctuating property market, the trend is more towards investing in a home rather than moving to a larger property. However, many customers also find that their equity is tied up in their property already, so a secured loan is a good way to release some of that equity and reinvest it back into the house. This will increase the value of the property and is one of the most financially prudent approaches to money management for property owners.
Car finance
With the car scrappage scheme ending, customers looking for a new car will have to find more money to finance a new vehicle. Modern cars are very expensive and the finance packages available from car dealers can be costly too, with much higher APRs and larger deposits required. By taking out a bank loan to finance a new car, customers can benefit from a lower APR and instant access to the money required to make the purchase. But you don't have to buy a new car to qualify for a loan - if your finances are tight it may be wiser to go for an older vehicle. A good quality second hand car will be cheaper and probably easier to finance. Do remember however, that the depreciation on a car is considerable, so choose carefully before deciding on which model to buy.
Travel
The world has become much smaller, thanks to cheap international air travel. But the holiday of a lifetime still doesn't come cheap, and often you have to move quickly to take advantage of a bargain. Thanks to online loan decisions finance for a holiday can be quickly organised, allowing you to pick up a great holiday at a lower price. Unsecured loans are ideal for those wanting to visit relatives on the other side of the world or to take that cruise of a lifetime.
Wedding expenses
If you're planning a big white wedding, expect to pay an average of £11,000 for the privilege. If you are paying for your wedding without financial help from parents, for example, that could mean starting married life with a very large debt. But a big wedding is a once in a lifetime event, and most brides and grooms feel that it is a worthwhile expense. Taking out a loan can cover not just the expense of the wedding, but also the honeymoon and to provide funds to help start the couple's married life together as well. Whatever the reason, loans provide customers with a manageable way to organise their finances and pay for the big ticket items. Using a comparison website to compare APRs, actual costs and the range of loan providers is the quickest and easiest way of deciding how to manage your finances without getting into an unmanageable debt. But always remember to read the small print!
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