A personal loan may be used for practically anything. Some lenders will ask how you plan to spend the money, while others are only interested in how you plan to pay it back. Even though personal loans can be expensive, there is a wide range of circumstances when applying for a personal loan is the best solution.
Consolidating Credit Cards and Paying off High-Interest Debt
One of the most popular reasons that people apply for personal loans is to consolidate credit card debt. While the interest rates on most credit cards are quite high, the average interest rate on a personal loan is relatively low. This makes it possible to pay the balance down much faster. In the long run, you also end up paying less interest overall.
The greatest advantage to using a personal loan to consolidate credit card debt is that it is so much easier to manage one balance. You will no longer have to worry about making multiple payments to separate companies. It’s just one payment each cycle and you are done.
In addition to credit cards, there are other types of debt that carry high rates of interest, such as payday loans and student loans. You can use the money that you get from a personal loan to pay off these debts and reap the benefits of paying less interest.
Home Improvements and Repairs
Another reason you may need to apply for a personal loan is if your home is in need of improvements or repairs. You have other solutions available, such as home equity loans, but you would have to put your home up as collateral. Therefore, a personal loan is a great way to get the money that you need without risking the loss of your home if you fall behind on payments.
Sudden Life Change
There are often times in life when the unexpected happens and you are not financially prepared for the challenge. The main breadwinner in your household could suddenly find themselves out of work, a member of your family could be injured or become ill, your only mode of transportation could stop running… the list of unexpected emergencies is endless.
In most of these situations, you are going to need a large amount of money and you are going to need it fast. Whether it is to pay for medical bills, a new car, or to keep the lights on until you find a new job, a personal loan is going to be one of the best options under these circumstances. You will be able to get the money that you need to stay afloat. Best of all, you have the option to pay back the loan gradually at a low interest rate.