Is life throwing you some financial challenges lately?
Even when you’ve got your finances in order, you never know when you might need a little extra capital. This is where personal loans can be beneficial.
This might lead you to ask, what can personal loans be used for?
The answer is, just about anything. But you want to be smart about how you use one.
How Personal Loans Work
When you take out a personal loan from your bank, credit union, or another online lender, you’re borrowing a fixed amount of money which you agree to pay in installments.
The life of a typical personal loan ranges from 12 – 84 months. So that means you’ll be paying back the loan every month for that set amount of time.
You also agree to pay interest on that loan at a rate that’s either fixed or variable. And qualifying for a personal loan is based on your financial history.
So Just What Can Personal Loans Be Used For?
As we stated above, you can use a personal loan for just about anything (barring gambling, illegal activities, and a few other exceptions.)
But some ideas are better than others. For instance, you probably wouldn’t take a personal loan to buy a house or a car. There are specific loans for such things.
The following suggestions fall into the “better ideas” category though:
Pay off Credit Card or Student Loan Debt
Personal loans typically have a lower interest rate than student loans. And they’re almost always lower than credit cards. So if you have debt in either of these areas, you could use a personal loan to pay off what you owe.
Just be sure to check that the rates are, in fact, lower on the personal loan than on the others.
Deal with an Emergency
Life throws you a curveball every so often. And not everyone has enough riches that they can keep an emergency fund.
So when you have a sudden need to address an emergency, a personal loan is going to be a far better choice than a credit card with a high interest rate.
You may not have thought of this. But the fact is, building wealth starts with making solid investments.
To make those investments, you need to have capital.
Borrowing money in the form of a personal loan can pay off. But it’s not risk-free, as investment experts like those at Sima Captial will tell you.
So if you don’t absolutely know what you’re doing, hire someone who does.
Take Care of Home or Auto Repairs
When your car or home needs major repairs, you can’t ignore them. And you can’t just go out and buy new ones either.
Whether you need a new furnace in your home, or car maintenance to ensure your safety, get them taken care of with a personal loan before they get worse.
Pay Medical Bills
Aside from the stress you experience when you can’t pay medical bills, you’re also damaging your credit.
That’s because medical bills that go unpaid end up with a collection agency. And you can be sure they’ll report the past-due account to the credit bureaus.
So in this case, you’re using a personal loan to protect your credit.
How Could Some Extra Money Help You?
Now that you know the answer to what can personal loans be used for, consider how one might make life easier for you.
Then start reaping the financial rewards.
And for more helpful advice on managing your money, keep checking back with our personal finance blog.