Whether you have your personal loan unsecured or backed by collateral, it is a source of funding that can be used to pay for almost anything, from debt consolidation to home improvements. With these loans, the lender gives you a lump sum that you repay with interest in fixed installments, usually over 1 year to 5 years.
Refinancing Credit Card Debts
A high-interest credit card debt can place a huge burden on your finances, making it difficult to reach your financial goals. Personal loans let you take fixed monthly payments, making them easier to keep track of than usual credit cards with variable rates. Refinancing your credit card debt with a personal loan also saves you money with a potentially lower fixed percentage rate and a set repayment schedule.
Consolidating Many Types of Debt
Personal loans can also be used to consolidate many types of debt into just one fixed monthly payment. Consolidation is very simple, too. All you do is take out a new loan and use the funds to pay off your old debts, making payments on your new loan.
Financing Home Improvements
Home renovations add value to your home, making it a better place to live. There are a number of ways to finance your home improvements projects, such as personal loans and home equity loans. Renovating your home with an unsecured personal loan doesn’t require you to back the loan with collateral.
Making Large Purchases
Since personal loans can be used to pay for almost anything, some consumers use them to make a large purchase, especially in an emergency where saving up isn’t possible, such as when an appliance suddenly breaks down.
Buying a Car
It is possible to use a personal loan to pay for a car but it doesn’t have as many upsides when compared to auto loans, which tend to have lower percentage rates and are easier to qualify for than unsecured personal loans. A con of auto loans is that they need you to put up your car as collateral, which means that you could lose your car if you default on the loan. Here, a personal loan might be a better option, depending on your credit, as borrowers with good-to-excellent credit can qualify for a lower APR on a personal loan and could pay off debt sooner.
