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Should you take out a personal loan to pay bills after the pandemic?

11 experts weigh in on when it makes sense — and when you should explore other options.

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With unemployment at an all-time high, many Americans are struggling to pay their bills. We asked 11 financial experts what they thought about taking out a personal loan to cover personal costs after the pandemic. While many agreed it could be useful in some situations, others recommend exhausting your non-borrowing options first. Responses are opinions and were edited for length and clarity.

Robert Scott
Professor of Economics and Finance
Monmouth U

In typical economist fashion, I will answer your question with: It depends.

If someone is facing serious financial shortages that will lead to losing a home or shelter, harm to the family (for example, not getting necessary medication), then it makes sense to take a personal loan if needed to meet these needs.

Try to use the lowest interest personal loans. Credit cards are a very expensive form of debt, so are payday loans. Also, don’t be afraid to ask family or others for a loan if that’s an option.

People should avoid personal loans if there are ways to adjust spending to avoid it. Look for any expenses that are not necessary and can be cut immediately. People would be surprised how these small savings each month can save big money over a year.

For people stretched too far — as many are right now — survival is paramount. So if taking on some debt ensures people’s well-being and security, then it is useful and purposeful.”

Brian DeChesare
Founder
Mergers and Inquisitions

This depends on your answers to three questions: Will you qualify for a personal loan? Do you absolutely need the money? What are the alternatives?

Many people might not qualify for personal loans due to job loss or reduced income. Additionally, their credit score may have taken a hit due to the crisis.

If the only options to get by are using credit cards or taking out a personal loan, then you’ve got to compare the interest rates.

If your credit card charges 20% or 30% interest and you can get a personal loan with a rate below 10%, then obviously it’s the superior option. The lower interest rate equates to saving exponentially more money in the long run. And that’s vital due to an uncertain economic future.”

Adam Sanders
Director
Successful Release

Yes — if you’ve exhausted all public assistance options.

“There are a lot of different forms of financial support available, from stimulus checks to rent deferral, that you should take advantage of before taking out a personal loan that will charge you interest.

If you’ve exhausted all public assistance options, a personal loan can be a great way to cover your financial responsibilities while paying a much lower interest rate than a credit card.

Using the loan funds to pay your critical expenses like your mortgage, electricity and food while saving your credit score from missed payments is often a smart move.”

David Bakke
Financial expert
Dollar Sanity

It might be a good idea, as long as you’ve done a few other things first.

“The most important would be getting on a budget and slashing expenses. Your discretionary spending should basically be zero, and you should research the Internet for ways to save on utilities, groceries and everything else.

Then, you should look for any other options out there, like taking on a side gig to generate extra cash or borrowing from a friend or family member — as long as you can get a better rate than you would with a personal loan.

If all of that is done and you still need cash, then yes, a personal loan would be a good option. It’s a lot better than racking up credit card debt where you’ll most certainly pay more in interest.”

Matt Edstrom
Chief marketing officer
GoodLife Home Loans

It’s worth considering bills, but think twice before taking out a personal loan to cover debt.

“Ultimately, determining if taking out a personal loan in order to cover bills or debt is the furthest thing from a black and white scenario.

Personal loans are absolutely advantageous in certain scenarios. Any payment with a high-interest rate is typically an ideal time to take out a personal loan to pay it all off, rather than accruing thousands more in interest by making years worth of monthly payments.

Of course, this isn’t always feasible. Your credit score might be too low to qualify for a personal loan with a satisfactory interest rate. And if you find yourself out of a job, or even uncertain of your status of employment over the next year or so, then think twice. Not paying on a personal loan will open up an entirely new set of issues.

A personal loan is certainly an approach worth considering when tackling bills and various high-interest payments. But consult a financial professional about the best approach to tackling debt. When in debt, the first concern should be getting out of debt, rather than potentially adding even more debt when it isn’t necessary.”

Madison Smith
Personal loan expert
Best Company

Personal loans can be a great benefit to those who are trying to consolidate credit card debt or need extra cash because the pandemic caused a financial hardship.

“A personal loan is cheaper than the alternative of taking on credit card debt — the average interest rate for a personal loan is around 7%, whereas the interest rate for a credit card is 15%. If you are going to take on some form of debt post-pandemic, then I suggest taking on the lower interest debt of a personal loan.

The more rigid payment plan may help you actually pay off your debts once and for all, rather than relying on the false sense of wealth that revolving credit card debt seems to get millions of people into trouble with.

The caveat is that personal loan monthly payments are required. There’s no option to pay off the minimum balance like a credit card. Make sure you agree to a monthly payment plan you can afford to cover, even during a time of uncertainty.”

Sho Sugihara
Co-founder and CEO
Portify Limited

Individuals should only take out loans to cover bills or debt when absolutely necessary.

As we see now during the pandemic, utility companies, lenders and healthcare providers are more likely to work with consumers to build personalized repayment programs.

Consumers should always call their current debtors and negotiate before taking out new loans to cover old bills. More often than not, we see that consumers can at least get repayment extensions with this approach.

If that is not feasible, the government has passed relief packages to help consumers with financial difficulties, including paying bills. Consumers can access more details about these government programs on USA.gov.

Jeff Zhou
CEO
Fig Tech

Taking out a personal loan post-pandemic is not a simple yes or no, since it depends heavily on the individual’s situation and the use of debt.

“The first question to answer is if you expect to have job security going forward. If you’re even slightly unsure, then the bar for taking out a new personal loan for anything unessential is going to be quite high.

The second question I would focus on is the use of funds. What exactly are you taking the loan out for? What is your current plan for the bills and debt if you don’t get a new personal loan? Will a personal loan be cheaper than that plan?

Beyond the interest cost, there’s a credit score and time cost to taking out personal loans, even when rates are low. So you have to make sure your new loan will actually save you money. If you feel good about both questions, then it is a good time to shop around for competitive rates.

As you’re shopping, don’t forget to quiz lenders on any potential fees in the fine print, as these can really affect the total cost of the loan!”

Howard Dvorkin
CPA and personal finance expert
Debt.com

It could if you have large credit card balances and little cash flow.

Yes, if you’ve racked up big credit card balances — at something like 20% interest — and you don’t have the cash flow to make anything but the minimum payments. A personal loan at a 6% rate will save you hundreds and maybe even thousands of dollars.

Steven Welch
Chair of the Department of Accounting and Finance
Saint Benedict, Saint John’s University

Normally, no — unless you’re paying off credit cards or other high-interest debt.

Generally, it’s not wise to take a personal loan to cover low-interest debt such as home mortgages, auto loans or other debt that has collateral. Always pay off the highest interest debt first — often, that’s credit card debt.

If you want to consolidate your debt from many accounts, that’s OK. But you shouldn’t include debt that has a lower interest rate than the consolidation loan unless absolutely necessary to reduce your payment to a manageable number.”

Anna Serio
Personal finance expert and writer
Finder

It all depends on your financial situation and what kind of rates and terms you can qualify for.

“You might not want to consider taking on more debt until you’ve exhausted other free financial assistance, like grants to individuals and interest-free deferment.

Some lenders were offering low- or no-interest loans with around three months of deferred repayments at the start of the COVID-19 outbreak. But as states reopen, those options are likely to dry up — along with other government assistance.

The pandemic has affected the lending industry as much as everyone else, so you can expect some changes to how personal loans work in the coming months. Consulting a financial adviser can help you navigate the shifting economy and decide which option is right for your situation. You can often find free personalized advice through a nonprofit credit counseling agency.”

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