Understanding what you can use a personal loan for allows you to take advantage of this flexible form of financing.
Understanding what you can use a personal loan for allows you to take advantage of this flexible form of financing. Personal loans can be used for both planned and unplanned expenses — all while staying within budget.
What makes a personal loan different from other loans is its “unsecured” nature, meaning it doesn’t require collateral (such as your house or car) to borrow against the loan. This makes being approved for a personal loan easily accessible and useful.
We’ll discuss some of the most common uses of personal loans below to help you decide if one is right for you!
If you find it difficult to manage high-interest debt from multiple sources, getting a personal loan can help to consolidate debt. One of the most common uses of a personal loan is to pay off a credit card but car loans and student loans fall close behind. A personal loan with a lower interest rate than your other debts can benefit you by saving you money.
Use the money from your loan to pay off other, more crushing debts to simplify keeping up with varied monthly payments and due dates from loans. Instead of having to make payments to multiple creditors, you’ll be able to make one simple payment a month, without struggling to pay off that high interest.
Car loans are secured by the vehicle you choose. Therefore, the interest rates tend to be lower than those on unsecured personal loans. Unless you can score an unusually low rate, an auto loan is more than likely the route you’ll take to finance your new ride. Personal loans don’t require a down payment whereas most car loans do.
This could be a great use of a personal loan as long as you stay committed to making the payments. Using a personal loan is better than emptying your savings or emergency funds when trying to pay for a large expense. Keep in mind, personal loans aren’t limited to cars but can be used for a boat, RV, or even a private jet!
Medical expenses are usually unannounced and can be costly. Even if you’re medically insured, only a certain extent is covered, leaving the remainder for you to pay.
A personal loan is helpful because it can be quickly disbursed to you for unexpected expenses and emergencies. If you find out you’re sick or injured and need to undergo a procedure, you won’t have to delay this with the help of a loan and the money readily available.
Sometimes upgrading your home becomes a necessity. Old appliances can break, your roof can leak, or plumbing could malfunction. Fixing an issue could be very expensive and you may not have the cash on hand.
Using a personal loan for home improvements is a smart way to avoid draining your savings or racking up your credit card limit. You might also use a personal loan to upgrade your home to boost its value, especially if you’re looking to sell.
The important difference between Home Equity or Line of Credit (HELOC) loans and a personal loan is that the home loans require you to put your house down as collateral. If you end up defaulting on the loan, your home could be taken away from you. A personal loan doesn’t require you to put your home or other assets as collateral.
Read More: Are Personal Loans a Bad Idea?
Moving locations can help you cut your housing costs so you can have more room in your budget, can allow you to find a better space for your family, or allow you to take advantage of new career opportunities. The cost of a move can vary widely depending on how far you’re going and how much stuff you have.
The cost to have professional movers box up your things and transport them to your new abode can cost you thousands of dollars. A long-distance move can sometimes be just as expensive as moving locally. When you have to relocate and need a solution to cover the price of moving, a personal loan could provide the funds you need to get settled in your new home.
Some moments in life require extra funding. A personal loan can be the solution.
For example, buying an engagement ring is a significant purchase, and it may be hard to pay for a ring upfront. Wedding expenses can also add up. And honeymoons can certainly be pricey but any dream vacation comes with a price tag. A personal loan can help you pay for it all!
Without savings to pay for these special occasions, a personal loan may seem like a great idea. The interest rate may be lower than if you used a credit card, and a well-managed loan can boost your credit rating.
Whether you’re starting a new business, freelancing on the side, or are an established business owner, financing can be important to the success of your business in the long run. For larger purchases (that could take longer to pay off) relative to your business needs, a personal loan can offer a low and fixed interest rate with predictable monthly payments.
A personal loan can be a good option for emergencies and planned expenses alike, especially when compared to high-interest rate credit cards or payday loans. Whether you should get a personal loan depends on the loan offer and your personal financial situation.
Click below to learn more about personal loans and how to apply for one today!