When you’re in your 20s, you don’t think about your finances. You may find yourself spending more than you actually bring in. What do you do? Is something you should be doing?
2 Reasons To Consider A Personal Loan When In Your 20s
Debt Consolidation
You may think that taking out to solve debt is only going to compound the problem. Not true. If you have $10,000 in credit card debt with an interest rate of 25 percent, you’re paying a lot more in interest. With a personal loan, you can pay that debt off and make a lower monthly payment and pay less in interest.
- You’ll see be $15,000 in debt, but you’ll have an installment plan that has an end date.
- You make a single payment each month instead of more than one credit card company.
Investment In Yourself
Not every person will use a personal loan to pay off expenses. If you don’t have expenses you want or need to pay off, then you can consider investing in yourself with the money such as relocation expenses, higher education, becoming an entrepreneur, etc.
2 Reasons To Avoid Getting A Personal Loan
Frivolous Spending
A personal loan is usable for any reason, but some lenders do put restrictions on how it can be used. Personal loans shouldn’t be used to pay for everyday expenses, large purchases, vacations or weddings (although this is acceptable if you can pay it back in a timely manner).
High-Interest Rates
If you have less than stellar credit, you could be hit with high-interest rates. Remember, a personal loan is an installment loan, and it’s best to have a good debt-to-income ratio and great credit to ensure a lower interest rate. If you don’t, you could be subjected to interest rate fees of 25 percent or higher rates because you’re considered a risk.
If you’re going to take out a personal loan in your 20s, be sure it’s used to improve your financial standing before you turn 30.
