What are Personal Loans Used For?

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Originally posted on https://www.rfdtv.com/story/40651843/what-are-personal-loans-used-for

You know what a mortgage and student loan are, but have you heard of personal loans? They are the fastest growing form of debt in the U.S. At the end of 2018, nearly 11% of the adult American population had an outstanding personal loan.

What are personal loans used for? They can be useful when you need quick cash to get you out of a jam or to pay for a sizeable expense. Here are some of the reasons why you may want to apply for a personal loan.

Pay Off Credit Card Debt

A personal loan is a popular solution for paying off credit card debt, especially if your credit card company imposes a high-interest rate. This can cause the amount owed on your card to accumulate quickly. Missing a credit card payment can result in a late fee charge and can hurt your credit score.

Personal loans come with interest as well, but they tend to be lower than that of most credit card companies. They are also fixed, so you don’t have to worry about them increasing, unlike credit card interest rates. When used in this way, they are the lesser of two evils and many people find it easier to pay off a personal loan versus a credit card.

Pay For Home Improvements

Home renovations aren’t cheap. Depending upon the project and area of your house receiving the upgrades, it can cost thousands of dollars for a home improvement project. Instead of financing the job, which can come with a high-interest rate, you can pay for it upfront using a personal loan instead.

Pay For a Wedding

The average cost of a wedding in the U.S. increased to over $44,000 in 2018. If you’re planning on tying the knot and can’t swing a swanky reception, taking out a personal loan can help cover the cost.

Pay For Medical Expenses

The high cost of medical expenses not covered by insurance can easily put a sick person into debt. Borrowing a personal loan to take care of medical bills can help get collectors off your back.

What to Know About Personal Loans

Personal loans come with their own limitations. While their interest rate is often lower than that of credit card companies, it is higher than car financing which means they’re not an ideal option when paying for a vehicle.

Personal loans are considered a form of installment loans. This means you borrow a lump sum and pay it back in installments. You’ll be expected to make a minimum payment on time each month or you may have to pay a late fee.

Multiple missed payments can affect your credit score. When taking out a personal loan, always read your terms and agreement to understand the consequences if you can’t repay the loan.

What Are Personal Loans Used For? Just About Everything

Now you know the answer to the question “what are personal loans used for?” The answer is just about everything. They are the ideal way to pay off another debt when you need emergency money, or you wish to pay for a splurge.

Before you consider a personal loan, you may want to bulk up your savings and pay for your expense yourself. Check out our latest AARP Live Minute on four ways to save money here on RFD TV.