While it would be great if we all had enough money to fund all of life’s expenses without worry, we know that’s not the case. Sometimes we have to borrow a little to keep moving forward, and that’s when a personal loan can be a good solution.
What is a personal loan?
A personal loan is a type of loan that involves borrowing a set amount of money and paying the creditor off with interest in a structured payoff schedule. These loans are “unsecured” because you don’t have to put up any collateral (such as your house, car, etc.) to get the loan; instead, lenders use your personal credit and other factors to determine eligibility. The concept is simple and similar to the borrowing you’re used to: you borrow and pay that money back. One of the benefits is that you have more flexibility with what you can use the money for.
Here are 6 situations where a personal loan can help:
1. Debt consolidation
Having different amounts of debt with various creditors can be difficult to handle. Each debt will have its own interest rate, monthly payment, and due date. For these reasons among others, borrowers can sometimes find themselves lost in their debts, resulting in missing payments, paying more interest over time due to higher interest rates, and having another thing to worry about. By taking out a personal loan, you can use that money to pay off your various creditors and be left with just one single monthly payment to make. Consolidation can save you time and money and is one the best benefits a personal loan can offer. If you’re curious how much you could potentially be saving, check out our personal loan calculator.
2. Credit card payoff
Like debt consolidation, credit card payoff can be a great benefit of a personal loan. You may not have a lot of different sources of debt, but even if you have one credit card debt, it can be worth considering. Credit cards often carry high interest rates that you could potentially avoid by exploring the possibility of a personal loan. Taking out a loan to pay off a credit card can be a smart way to keep a little more of the money you earn for yourself.
3. Home improvement
Looking to make some home improvements but don’t want to dip into your savings or take out a home equity loan? Personal loans can be a perfect solution for a home improvement project. There is no equity required to qualify for a personal loan, and you can apply from the comfort of your own home and receive your funds in as little as a week. Taking out a personal loan to make those bathroom renovations, upgrade your kitchen, or add a pool or spa to your backyard can be a great option.
4. Medical expenses
Alright, this isn’t an ideal scenario: you’re sick, need to undergo a procedure but realize you don’t quite have the money available to pay for it. This is a situation where taking out a personal loan can prove beneficial, since you can borrow what you need and select a payoff structure that works with your budget.
5. Major purchase
Whether you’re making a larger purchase that you’ve deemed necessary or you’re trying to figure out how to pay for a new refrigerator because yours suddenly stopped working, or your latest car issue seems like it’s going to be an expensive one to fix, a personal loan can be a good consideration. Get the money that you need and pay off the balance over a longer period of time.
We all need a break from time to time but we know that a vacation can cost a little more than we’d like to spend at any one time. A personal loan can be a good way to finance your vacation, so that you can pay it off over time. And hey, it could be a good monthly reminder of just how much fun you had.
There are many reasons to take out a personal loan and these are just a few. Each individual’s credit history and financial health will influence the interest rates of a personal loan offered; however, it’s very possible that these rates could help you handle the situations outlined here along with many more.