Personal loans are becoming more appealing with each dawn as an increasing number of Average Joe’s continue to apply for them. However, this is not surprising as they can come in handy in the wake of a crisis as they are easily accessible and also require no collateral. Nevertheless, due to their ease of borrowing, most borrowers often take them out without any good reasons leaving them far deeper in debt than they were before borrowing. To ensure you don’t end up in such a mess here is a quick overview of some of the things you can use a personal loan on.
To consolidate debt
This is one of the best ways to use your personal loan. What exactly is debt consolidation? This is when you combine your debts into one loan with a lower interest rate. For instance, if you have two or more loans with a high-interest rate, you could take out a personal loan, and pay them both with it at a much lower rate. Consider this example; you have two credit cards, the first one has a $6000 debt with an interest rate of 18.50% while the second one has a $10,000 debt with an interest rate of 19.99%.
To make things manageable for yourself, you could take out a $16,000 personal loan with a 6.99% interest rate, pay off the debt on the credit cards and remain with only one loan to pay. Even though you will still have the same amount of debt, you will be paying it at a much lower interest rate and at the same time you will ease the stress of having to deal with two loans as you will only have one to handle.
If you have no credit card debts or other loans to pay off, then a personal loan could come in handy during a crisis. It is easy to wonder what type of emergency could make you take a loan but keep in mind that life can be pretty unpredictable. One minute everything could be going your way, the next minute you find yourself in a crisis so do not underestimate the essence of a personal loan during those times as it could help you respond to the situation at hand more conveniently than having to use your credit card. Furthermore, personal loans are quickly processed and hence will help you react to the situation more conveniently.
For home improvements
If your home needs urgent repairs and maintenance for an upcoming function or whatever reason, then it would be wise to take a personal loan instead of a home equity loan. Why? Well, even though a home equity loan may have a lower annual rate than a personal loan, it is more costly in the long run as you may have to pay for a home appraisal or closing costs. On the other hand, lenders usually have no restrictions on what you can use your loan on which means that besides the interest rate charged, there are no other additional costs thus allowing you to carry out your home improvements comfortably.
Other uses of a personal loan
– For medical expenses
– To cover moving costs
– To pay off debts
– To start or improve your business
– For pet care
– For a vacation
– To cover wedding expenses
In a nutshell, there are so many ways to use a personal loan. You need a good reason as well as a stable source of income to repay the loan as failure to do so severely affects your credit score. Keep in mind that due to the lack of collateral, the interest rate might be a little higher in comparison to other loans as the risk of you not paying back is higher when there is nothing to back it up.