There may be plenty of ways to borrow money- but none as versatile as a personal loan. Personal loans are unsecured loans that you can use for a variety of purposes. It’s true that personal loans come with high-interest rates, and can turn into a burden if not managed well. But they’re also the easiest means to obtain money when you’re going through a financial crisis. This is what makes personal loans a more popular choice.
What are personal loans used for?
Personal loans can be used for just about anything. But that does not make them the ideal choice for all situations. These loans suit some purposes better than others. Here are the most common uses for personal loans:
Debt Consolidation
When you’re struggling to keep up with a variety of debts, debt consolidation is a smart move. You can take out a personal loan to pay off your existing debts so that you are left with just one lender to repay. The main advantage of using personal loans for debt consolidation is that you will know your exact monthly liability and have a clear idea of the time period within which you will be debt-free.
Medical Expenditure
Medical emergencies often catch you off-guard. And when they do so, you should be able to dedicate attention to your health rather than the financial burden that accompanies it. A large percentage of Americans with employer-based health insurance have high deductible plans. This means the out-of-pocket expenses can run into several tens of thousands of dollars. This is where personal loans can come in handy. They provide the much-needed funds to clear medical bills and allow you to focus on your health.
Moving Expenses
The American Moving & Storage Association says that moving within the state may cost you about $1200. And if you’re moving out of the state you may have to pay 4 times the price, if not more. In addition to these expenses, you may have to bear other hidden costs such as cleaning fees and security deposits. A low-interest personal loan can be very helpful in meeting these expenses.
Home Improvement
If you want to remodel your house, personal loans are a great choice. While there are other options such as home equity loan or home equity line of credit, not everyone has the equity to qualify for these loans. But with personal loans, you do not have to worry about how much equity you have in your home. Besides, you don’t run the risk of losing your home if you fall behind on payments.
Wedding Expenses
Weddings are expensive. From the venue to flowers and DJs to plated meals an average wedding can cost between $30,000 and $40,000. If you haven’t saved up enough to pay the entire wedding bill, a personal loan is your best friend. It covers all, or a portion of your wedding cost, and allows you to enjoy planning your wedding rather than fret about it.
A personal loan is also the ideal choice when you want to start a business or pay for any major purchase. But whatever the purpose, make sure you plan well and set a realistic budget for your expenses. No doubt personal loans can be very useful for a variety of purposes. But if not handled with discretion, they can soon turn into an unwanted burden.