What are some uses for a personal loan?

Almost anything!

You might wonder just how a personal loan can be used. The answer to that question is…sort of personal. In other words, you can use a personal loan for almost any need you have.

Ways to use a personal loan
In the past, a personal loan was commonly used for large purchases such as washers and dryers. Today, these types of purchases -- perhaps too much for one month’s paycheck but still quickly paid off -- are usually made with credit cards, and a personal loan is usually reserved for much larger needs.

• Debt consolidation. If you cannot get a secured loan, a personal loan can be usually be used to consolidate debt at lower interest rate than credit cards generally carry.
• A wedding. With the average price of a wedding approaching $30,000, many parents and/or couples take out a personal loan to pay for the nuptials.
• A special vacation. Sometimes a big vacation can be paid for through a personal loan, costing less in the long run than if you were to use credit cards.
• Whatever else you might need. There really is no limit to the use of a personal loan; however, you might want to think carefully about what you’re willing to pay interest to get.

Proceed with caution
A personal loan can seem too good to be true: A loan that you can use for anything that you want. However, you should only get a personal loan if you cannot get a secured loan and, then, only after serious consideration. There are many disadvantages to a personal loan.

• High interest rates. Since it is an unsecured loan, a personal loan is a greater risk to the lender. Therefore, you are likely to pay over 10 percent as your interest rate. You might be able to cut that rate in half with a secured loan.
• Higher costs. Because you pay so much more in interest, the overall cost of the loan is high. In the end, a personal loan can cost thousands more than a home equity loan for the same amount.
• Not tax deductible. Whereas the interest on secured loans is usually tax deductible, the interest on personal loans is not.

In spite of its disadvantages, a personal loan can still be a good choice in some situations. If you do not have a home or cannot use your home equity, a personal loan might work for you. By shopping around, you may be able to find a low rate. A great place to research different loans is at www.LendingTree.com. There, you can fill out one simple form for a personal loan and receive offers from up to four different lenders. It is an easy way to compare rates and find the best deal around.

Related Topics:

• Cash-out refinancing
• Personal loans
• Using your home equity