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why do people take loan

Why Do People Take Personal Loans?

(This article was originally published on the 12th August 2017 and updated on the 14th January 2020).

Why do people apply for personal loans? One obvious answer is because they require cash that they do not have on hand. In fact, some people do have cash on hand but still prefers to borrow. And you might be wondering why?

One of the main reason is that applying for a Personal Loan or Koperasi Loan may be faster or easier to access financing than liquidating their assets and getting the cash that they need. Now, let’s take a look at some of the reasons why people apply for a personal loan.

1. Emergencies

Photo from Cied Peru

If you find yourself in need of quick cash to cover emergency situations such as paying off medical bills, major car repairs or to sustain everyday expenses due to a sudden loss of income, an affordable personal loan can be a major source of financial support.

Koperasi Loan is relatively easy to apply, even for blacklisted applicants in Malaysia as the repayment scheme is done through salary deduction. The final approval of the loan depends on the circumstances of their blacklist record.

2. Debt Consolidation

Photo from INSCM Magazine

A Personal or Koperasi Loan might benefit you by reducing your debt burden. If you have any outstanding credit card debts with an interest of 18% per annum, you can consider to use a cheaper personal loan to consolidate and pay off these expensive debts.

In addition, many borrowers would apply for a personal loan to pay off their overdue debts to clear their negative CCRIS/CTOS records. Read our article for a more in depth view on debt consolidation.

3. Buying an Automobile

Photo from Noxos

Conventional auto or hire purchase loans may not provide for cars that are older (10 years or more) such as vintage or collectible cars. These types of acquisitions could even be considered an investment as it is one of the few times that a car actually appreciates in value.

A Personal or Koperasi Loan can help you buy an aged or vintage car, or alternatively a motorcycle if you would prefer. In some cases, buying a motorcycle with a personal loan is much cheaper than a hire purchase loan due to the affordable interest rate offered by personal loans.

4. Business

Photo by Jcomp

If you have a solid business plan or your current business is growing, but you do not have the necessary funding. Hence, you are going to need a third party financing. Taking out a loan with low interest rates can help you to chase your business dreams. You can start to pay back the loan from the income and profits of your business.

5. Education

Photo by Universiti Teknologi Malaysia

Warren Buffet once said, “The best investment you can make is in yourself”. Upgrade yourself by building your knowledge and skills. It could be from getting a Bachelor’s degree to signing up for an online training course. Regardless of what you choose to improve on yourself, most educational programmes would cost you money.

Tertiary courses and even professional training can run into tens of thousands. Getting a personal loan can help you cover the cost of your programme and repay the balance within your means.

6. Deposit for a New Home

Photo by iWajib

Often, the biggest barrier to home ownership is paying a down payment to secure the purchase. While zero deposit loans do exist for budding homeowners, there are certain restrictions such as higher interest rates and lower margins of financing that might not make this type of loan a viable option.

In these instances, you can opt for a Personal or Koperasi Loan to cover the down payment on a house and later secure a conventional home loan (preferably with a spouse or relative) to complete the purchase.

7. Wedding

Photo by Muhammad Faiz Zulkefle

Finding your soulmate and getting married is a dream come true for most but what if you do not have enough money to pay for your wedding? Taking out a small loan with flexible repayments and low interest rates can help pay for the most special day in your life without leaving you saddled with heavy debt.

8. Home Renovation

Photo by Rawpixel

Expectedly, properties require upkeep for it to be in peak condition and to retain (or increase) its value. Still, renovation costs can be hefty if you do not have the option to pay in cash or if you do not want the hassle of cash out refinancing.

Using a Personal or Koperasi Loan might be an easy way out for you. If you are having doubts on the processes of doing so, read our step-by-step guide on how to use personal loan for home renovation.

9. Travel

Photo by Jcomp

Many Millenials may or may not have the goals of travelling to X number of countries before hitting the age of 30, for example. However, some of these vacation plans will cost you a lot in order to make that happen.

In situations whereby sometimes what you saved is not enough and you are still short of a small amount of money. To fulfil your dream, applying for a personal loan might be a good idea. You can use these loaned funds to set off to your dream vacation and pay for it through affordable instalments.

Things to Do Before Borrowing

Here are a couple of important reminders before you apply for a loan:

  1. Decide on an amount that is sufficient and which you can comfortably repay.
  2. Find out about the terms of your loan such as the tenure, repayment flexibility as well as how quickly you can receive approval and the cash.
  3. Check if the loan provider is legal to avoid being a fraud victim.

This article is prepared by Direct Lending, an online personal lending platform with the mission to provide simple, safe and affordable financing to all hardworking adults. We help borrowers to find, apply and receive financing that most suit them. Our service is 100% free.

Follow us on the blog or our Facebook page as we share more useful personal finance tips.

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