10 Uses for a Personal Loan
Personal loans are available for a variety of reasons and can offer a solution for a variety of financial issues. In this article, we’ll take a look some of the most common scenarios for possibly needing a personal loan, as well as some of your options.
10 uses of a personal loan
From debt consolidation to starting a business, there are many uses for personal loans. Here are some examples.
Consolidate credit card debt
A personal loan can help you consolidate your credit card debt, which can be useful if you have a balance on a number of cards. One payment might be easier to manage, and you could lower your monthly payments. You could also consolidate with a promotional 0% APR balance transfer credit card and save on interest.
Consolidate other debts
A personal loan might be a good solution for consolidating various types of debts into one loan with a single payment. By consolidating your debt with a personal loan, you could simplify your monthly finances and alleviate bill-related stress. Keeping track of many bills and payments can be stressful. This can help you get more organized and reduce the risk of missing a payment that could impact your credit score.
Pay off medical bills
Medical bills often hit us when we are least prepared to handle them. They also can pile up, especially if you have a drastic health situation and your insurance coverage doesn’t cover as much as you’d like. If your insurance coverage still leaves you with significant debt, a personal loan can provide an alternative to help you pay off this medical debt and make affordable loan payments over time. There are many medical loan alternatives from which to choose.
Give your home a face-lift
Personal loans can be a great way to cover the cost of home improvements or repairs. Sometimes things need to be replaced. This can include expensive household items such as a stove, refrigerator or a furnace. If you don’t have the cash to cover this expense, a personal loan might be an alternative over using financing through a store or provider.
Pay for your wedding
Weddings are expensive. Whether you are the parents of the bride or the bride and groom paying for some or all of the costs yourselves, a wedding loan, also known as a personal loan, could be an option to cover this life moment financially. If you have good credit and a solid debt-to-income ratio, you might be able to get a personal loan at a lower interest rate than some alternatives. A wedding loan could be preferable to having to tap a retirement account, which can be costly.
Celebrate a milestone
Life is short, and milestones such as anniversaries, birthdays or graduations are worth celebrating. A personal loan could provide the cash you need. A milestone wedding anniversary might prompt you to take that dream vacation you’ve always longed for as a couple. Maybe your child is graduating college and you want to send them to Europe to reward them. It may not be a good idea to go into debt to finance them, but a personal loan may be preferable to other forms of high-interest debt such as a credit card.
Financing a car purchase
A personal loan could be a better alternative than a traditional auto loan. Buying a car, even a used one, can be expensive. Paying $20,000 or even $30,000 or more for a new car is not uncommon. Auto loans are available from many banks, credit unions and car dealers. They are a good choice in many cases. But it’s still worth checking to see if you can do better with a personal loan on the rates and terms.
Starting a business
Starting a business can be the answer to your career dreams. It can be an expensive proposition as well. Depending on the type of business, there might be a need to purchase equipment, lease office space or provide some working capital while things ramp up. A potential benefit of using a personal loan for business is that the application process is usually easier and faster than applying for a small business loan. The risk, of course, is that your name and not the name of the business will be on the loan. This puts your personal assets and credit score at risk if the business fails.
A personal loan could be a way to finance a major purchase such as an electronic device, furniture or a boat. As always, make sure to compare your options to get the best value.
Paying for a funeral
Funerals are expensive. If a person died without life insurance or sufficient assets to cover their final expenses, a personal loan might be a alternative. Sadly, not everyone is financially prepared at the time of their death to cover their final expenses. If the person who died was a family member or a close friend and you want to cover their funeral expenses, a personal loan is likely a better alternative than dedicated funeral loans that can carry high interest rates.
The bottom line
Remember: While you can use personal loans to pay for the above expenses, it’s not always the best choice. If you have the money to pay for a birthday party, furniture or your wedding, that’s ideal. But personal loans could be an option if you need them to be.