There are lots of reasons to take out a personal loan and plenty of advantages. Personal loans can be used to pay off credit cards and consolidate your outstanding debt, among other things. And, unlike other forms of financing, unsecured personal loans don’t need to be backed by collateral.
Those are just some of the advantages you can experience when you apply for a personal loan. Let’s take a look at some of the other reasons for personal loans.
1. Consolidate debt
One of the most common uses and reasons for personal loans is to consolidate debt. Imagine that you have multiple loans or even outstanding credit card debt and they all have varying balances due as well as interest rates. That’s one of the fastest ways to find yourself in financial trouble, which is where personal loans can help.
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When you take out a personal loan for debt consolidation, you’re combining all of those outstanding balances into one monthly payment. It makes it easier to work out a timeframe to pay off your debt without getting overwhelmed.
2. Pay off credit cards
One of the best advantages to using a personal loan to pay off your credit cards is the lower interest rates. With lower rates, you can reduce the overall time spent repaying your outstanding balance by minimizing the total interest accrued. This allows you to pay off credit cards in finite terms with a clear end date in sight.
3. Finance home remodeling
A personal loan can be a “great option” to pay for home remodeling, says Kristin Shuff, group vice president of marketing at LightStream, an online lending division of SunTrust Bank in San Diego.
Whether you want to put on a new roof, install solar panels, remodel your kitchen or add a swimming pool, hot tub, landscaping or hardscaping, a personal loan can help.
The best fit is for people who don’t have equity in their home or don’t want to get a home equity line of credit, or HELOC, Shuff says.
4. Pay for a wedding
When you hear all these testimonials about wedding loans, what you’re really being sold is a personal loan. And, believe it or not, you may just want to take out a personal loan before you take your walk down the aisle.
A wedding loan can be used for big-ticket items like the venue and bride’s dress and smaller expenses like flowers, photography, cake and a wedding coordinator.
“It gives you the flexibility to pay for all those pieces whether you’ve contracted it through 1 place or put it together a la carte,” Shuff says.
5. Money for moving expenses
Local moves generally aren’t costly. But a major long-distance relocation, perhaps for a job opportunity, can be expensive enough to warrant a personal loan.
The funds can pay for moving household belongings, buying furniture for a new residence, transporting a car across the country and more.
One thing to consider before you apply for a personal loan to cover the move is whether your new income will enable you to pay off your balance. You don’t need the added stress of paying off your personal loan on top of starting a new career in a brand new location.
6. Finance funeral expenses
Some people forget to talk about funeral expenses when discussing the main reasons for personal loans. In short, funerals can be expensive. Not only are you covering the cost of a casket but the funeral director services, automotive equipment for transport, etc.
If a deceased person’s estate can’t afford these expenses, a family member or other person can take out a personal loan to cover the deceased’s final costs.
7. Pay medical bills
Medical expenses are “definitely” a category lenders see for personal loans, LightStream’s Shuff says.
Examples include dental services, orthodontics, cosmetic surgery, fertility treatments and bariatrics when costs mount to $5,000 or more.
Ancillary expenses like medical travel, parking, medications and aftercare also can be financed by a personal loan.
Child adoptions and related expenses are also a popular use to be paid using personal loans.
8. Buy a car, boat or RV
You can apply for a personal loan when considering a larger purchase like a car, boat or recreational vehicle. After all, most people aren’t walking around with tens of thousands of dollars in their wallet.
Examples of other uses include tiny homes, motorcycles, snowmobiles and horses complete with trailer, saddle and other equestrian equipment.
“All the secondary expenses that come with that horse purchase can be rolled into the loan,” Shuff says.
Additionally, a secured loan might be the way to go since they generally have lower interest rates than personal loans. Of course, if you don’t have a decent enough credit history, you can still take out a personal loan to cover these larger purchases.
9. Take a dream vacation
While your average vacation might not require you to take out a personal loan, what about a honeymoon or a luxury cruise? That’s where things can get pricey and where you might want to apply for a personal loan.
Just as personal loans can help pay for your wedding, they can also be used to help you see the world. Whether you’ve just graduated and you want to go on a trip or you’re celebrating an anniversary, there are lots of reasons for personal loans to help fund your dream vacation.
Keep in mind
While there are plenty of reasons for personal loans, you should be aware that you will have to pay them back. When you take out a personal loan to pay off credit cards or have the most perfect wedding, you are borrowing money that will need to be repaid. Personal loans are a great way to consolidate debt and make major investments, but just be sure to use them responsibly.
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