It can be a reasonable option to request a personal loan in times of crisis. When you feel a pressing need, you may opt for this lending option and obtain additional cash for a few weeks.
Getting a personal loan may be beneficial for urgent situations when you can’t postpone the decision and require some money to solve an immediate problem.
Other than that, taking on a side hustle or a second job is better to boost your earning potential and avoid debt.
Do You Need a Side Hustle or a Second Job?
Is it better to take out a $200 loan or find a side hustle? If you feel strapped for funds and don’t have any savings right now, you may request a small loan to cover the immediate bills or payments.
It’s always better not to put off any financial matters as they will grow into a snowball eventually. Otherwise, long-term projects and purchases can be covered with the help of your savings.
It has become widespread among Americans to have a side hustle these days. It can be a second job, a part-time solution, or a small business that will bring you additional income.
You may work in the evenings or at the weekend depending on your financial needs and how many hours you can allocate to this second job.
Consumers are becoming more technically experienced and updating their relevant skills and knowledge. You may launch a startup or open a small venture.
Some people start freelancing in their free time and later develop it into a full-time positions while enjoying the benefits of being self-employed.
Why You Don’t Need a Personal Loan
According to Statista, the total average debt balance changed significantly according to the generation.
Total average debt in the United States in 2021 by generation
For instance, the average debt of Baby Boomers was about $96,000 in 2021, while Generation X had an average debt of about $146,000. The lowest average debt was held by generation Z last year.
The pace of inflation is increasing rapidly, and the Federal Reserve can’t do much about this matter. The interest rates on lending tools such as personal loans and small business loans have increased while many consumers still rely on these crediting options.
Borrowing expenses can cost you too much these days, so it makes sense to boost your savings and consider an emergency fund.
When You May Need a Personal Loan
Are you looking for additional Benefits and Financial Assistance from the Government? Search the USA.gov web platform for financial and emergency assistance from your state’s human service or social service agency.
You may find useful data on various government programs that will help you pay for health care, housing, food, and other basic needs.
You should decide if applying for a personal loan will be helpful for you or your business.
When you should apply for a loan:
- Your credit history is good
- You have a specific business plan
- Your credit score is excellent or good
- You have a track record of success
When you shouldn’t apply for a loan:
- Your credit score is led-than-perfect
- You haven’t developed a business plan
- You don’t have enough time to grow your business
What to Do to Prepare for Taking out a Loan
Every person decides whether taking out a small loan is a good idea. It may offer you supplemental funding to start a new venture or grow your side hustle into a real business.
It may also become a nightmare with sky-high interest rates if you aren’t a responsible borrower or fail to make on-time payments. Any loan becomes your debt obligation that needs to be returned on time.
Similarly, any business idea involves risk, as you never know if it will lead you to financial success or failure.
Do you have sufficient savings to take on a side hustle or launch a small business? If not, you may still need a small business loan or a personal loan to begin with. If your business plan is good, the extra cash will help you finance the costs.
Here is what you should consider before you apply for a loan.
- Have enough time for a side hustle. Before you start the loan application process, you should realize you have enough time to devote to this new business or yours. If you already have a 9-to-5 regular job, allocating many hours to your new venture may take time and effort. Yet, it doesn’t make sense to request a loan if you just have a couple of free hours at the weekend. It may be wiser to find a part-time position then and avoid debt.
- Prepare a business plan. It should be precise and solid. You shouldn’t just have an idea about what you plan to sell or create. Your business plan should showcase how you plan to repay the debt once you decide to take it out.
- Check your credit score. This is an important step, especially for those willing to launch a startup or become freelancers. Since you don’t have an established business credit rating, the lending companies will look at your credit. This three-digit figure will demonstrate your creditworthiness and ability to handle financial obligations. Ensure your rating is above 700 to qualify for the best terms and cheapest interest rates. Poor credit holders have limited lending options and often face higher fees.
- Collect your financial records. The crediting partner will need to look through your financial records. They will help the lenders to assess the borrower’s reliability. After reviewing these records, they will approve or reject your application.
The Bottom Line
We all may experience urgent needs for extra funding, especially when we have to cover immediate bills.
Taking out a personal loan makes sense in times of crisis when you live paycheck to paycheck and need additional cash.
On the other hand, it’s better to take on a second job to save up for a significant purchase. A side hustle will help you grow your earning potential and boost your savings without getting into the vicious debt cycle.
You may work in the evenings or at the weekend depending on your financial needs and how many hours you can allocate to this second job. If you can spare a few hours, working as a delivery driver for Amazon Flex is not a bad choice if you use software like Amazon Flex bot to help you out get more deliveries and manage your schedule effectively, ultimately earning you a much higher revenue.