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5 Signs it Might Be Time for a Personal Loan

12/23/19 Ricky Baizas

Although consumers may think they’re financially stable now, one unplanned cost could drain their funds. Without a financial cushion in place, you might be at risk for going into significant debt. By recognizing financial red flags early, you can explore all your options to cover these costs, such as applying for a personal loan.*

 

Five signs it might be time for a personal loan. 

1. Low on funds?

Create a monthly budget to determine how much disposable income you have each month. Then look at current checking and savings account balances to see whether there is an adequate amount of funds to cover unanticipated costs. Dipping into a savings account to pay for bills might not be enough. If there isn’t enough money to cover three to six months of living expenses – the recommended amount for emergency savings, according to Business Insider – a financial crisis could drain a bank account. Applying for a personal loan could ensure sufficient funds in case a disaster arises.

2. Bills are close to being overdue

Creditors will make a note if consumers are delinquent in making payments. Late bills could lower credit standings drastically and prevent consumers from getting new credit. Taking out a loan to keep bills paid on time is one way to protect credit standings. Alternative lenders often have loan products for consumers to obtain fast cash, as soon as the next business day.

3. Missing installment loans in credit mix

The score on your credit report could suffer without the right balance between revolving credit and installment loans. According to FICO your credit mix accounts for 10 percent of your credit score. Since consumers require installment loans to boost their variety of credit types, getting a personal loan is a good way to add to an overall credit history.

 

4. When emergencies arise

No one is immune to unexpected damage, whether it is to their house, car or health. What if there was an emergency today? Would your current savings be able to sufficiently cover it?  Emergencies frequently necessitate fast cash, or else you may be left without transportation or housing. For speedy repairs and replacements, apply for a personal loan that will cover the cost with better terms than what some credit cards can offer.

5. Gaps in insurance coverage

Whether insurance covers every disaster and mishap or not, out of pocket expenses are a possibility. Insurance coverage, be it for health, home, auto, or other assets can have gaps leaving you unprotected. According to TransUnion Healthcare, out-of-pocket health care costs grew 11 percent in 2014 year over year. With more people paying out of their own wallet, a loan could be the bridge to financial stability.

 

If you see mounting financial trouble on the horizon, it might be time to consider applying for a personal loan.

 

Sources

http://www.businessinsider.com/how-much-emergency-savings-do-you-need-2014-8

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

http://newsroom.transunion.com/transunion-healthcare-report-finds-both-patients-and-hospital-administrators-feeling-the-squeeze-of-increased-costs

 


*This article has been prepared for general information purposes only. The information presented is not legal, financial, tax or accounting advice, is not to be acted on as such, and is subject to change without notice.
 
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