Statistics show that about 19.4 million Americans have a personal loan. These loans are given by banks and have a variety of uses. Unlike a car or home loan, there is not typically collateral that is attached to the loan. Have you ever considered taking out a personal loan? Is there a big purchase you’re struggling to pay for? What are the common uses of a personal loan? Keep reading to learn about the reasons that people take out a personal loan.
To Consolidate Debt
Taking out a personal loan to consolidate debt is a common practice. Many credit card companies come with high-interest rates if you are missing payments. To avoid these interest rates, people will use a personal loan to pay that debt amount off. Personal loans have lower interest rates and can allow you to pay off all of your cards at once.
Getting yourself out of debt greatly increases your financial health and puts you in a better position to be approved for a car or home loan in the future, if needed.
For Home Renovations
Have you dreamed of finishing your basement and turning it into an entertainment space? Did you buy an older home and desire to renovate the kitchen?
Home renovations can be costly to complete. It isn’t always in the budget to pay a few thousand dollars out of pocket to hire a contractor and purchase the materials. Taking out a personal loan that you can pay back with monthly payments can make this project feasible. Not only will you be improving your living situation, but you will increase the value of your home as well. Having the loan now can save you from having to delay the project due to financing issues.
To Pay for a Wedding
The wedding industry is crowded with several opportunities to spend money. It is easy to say that you want a small, simple wedding and spend way more than you budgeted for. You may have help from parents or relatives but still have a bill remaining at the end. Taking out a personal loan for these expenses can save you from starting a marriage with a mountain of debt. Making monthly payments for a short time can help it be less overwhelming and give you one less thing to worry about on the big day.
For Emergency Use
While you can’t predict when an emergency will happen, you can prepare your options ahead of time. An unexpected car accident could result in an abundance of medical bills, deductibles, and the need for a new vehicle. Knowing that you can quickly be approved for a personal loan can help you be prepared if an emergency occurs.
You could also prepare ahead of time by setting money aside in an emergency fund for this use only. Taking out a small personal loan for this fund and paying for the loan each month can be the push you need to set aside money for that purpose.
To Cover the Cost of Moving
There are many costs associated with moving. Depending on the number of things you have to move and the distance, you may choose to hire a moving company. If not, there are several rental options for you to transport your belongings from your old place to your new place. Adding the cost of gas, boxes, storage units, and the fees associated with the new place you are moving to can stretch your typical monthly budget much thinner.
Taking out a personal loan for this purpose can allow you to focus on the move and not worry about how you will pay for it all in one day. Moving can already be a stressful experience, so taking the financial burden off can help ease your mind.
To Improve Credit Score
Do you have any kind of debt history? Are you trying to build your credit to qualify for big purchases in the future? How can you boost a bad credit score?
The concept of credit is that you are given an amount of money and prove that you can pay it back through payments. Your credit score can be influenced by how much debt you have, your credit utilization each month, and any missed payments, among other factors. Taking out a personal loan amount that you already know you can pay off can help you boost your credit score. If you don’t have a debt history, this could be a way for you to prove that you can receive a loan and pay it back on time.
Some borrowers find it less stressful to go local when it comes to taking out a credit-building loan. People who live in San Diego might look for a company such as Oportun that provides loans in San Diego; people who live in Cincinnati may look for loans there. The key thing to remember, regardless of whether you borrow from a local or national company, is that you need to pay back your loan according to the lender’s terms so that you improve your credit score.
To Purchase a Used Vehicle
While some people purchase used vehicles from a dealership, many deals are between two people. Maybe you have a family member or friend that wants to sell you a vehicle. Instead of going through a long financing process, you could take out a small personal loan to pay the full amount immediately and make payments on the loan over the coming months.
The interest rates may be at what you would get with dealer financing and allow you to capitalize on the opportunity promptly.
To Purchase Home Appliances
Are your home appliances outdated? Are you having issues getting your dishwasher to work properly? Did your washer or dryer quit working unexpectedly?
Home appliances are typically costly to purchase because they are designed to last for several years. Replacing them can be a hit to your wallet, yet this is a perfect situation to use a personal loan. You can avoid compromising on the quality of the appliance that you want to purchase and go with the option that you like best. Spreading out the cost over several months can help it be less daunting of a purchase.
Get Started Today
Now that you have read about the reasons people take out a personal loan, you can act today. You no longer have to worry about how you are going to buy a new washer and dryer or pay off your credit card debt when you have one loan that you can make payments on.