What Can I Use a Personal Loan For?
Point of Interest
One of the benefits of a personal loan is that it can be used for a wide variety of different uses — some advised and some that might be better off avoided.
A personal loan is one of the most flexible borrowing tools available today. Most lenders are quite relaxed with what borrowers can use a loan for. Generally, these products are available through banks, credit unions and online lenders. Personal loans are unsecured loans meaning you won’t need to put up any collateral to get approval. If you’ve got a need for cash, a personal loan may be the right option for you, even if you have bad credit.
What can I use a personal loan for?
Improving your home can increase your quality of life, safety and property value. However, home improvements can be expensive. One of the most popular uses of a personal loan is to fund home renovations or improvement projects. For many homeowners, this can be seen as an investment as improvements generally increase property value, making it easier to sell the home and receive a profit on this investment. If you are interested in remodeling, also consider a home equity line of credit to pay for your improvements. You may be able to get a better rate and save a lot on interest and fees.
- Used for multiple projects
- Increases property value
- Higher APR than HELOCs
- ROI not guaranteed
Unfortunately, many medical expenses we face come unexpectedly and at the most inopportune times. Unlike other expenses, though, our health is something that can’t be ignored. If you’re facing unexpected medical bills that need to be paid, a personal loan might be the answer you’re looking for. You can use a personal loan to pay for hospital stays, surgeries, urgent care visits, medication and anything else that is required to get you or your loved one back to health.
- Meets urgent need
- Covers variety of medical expenses
- Payment plans through medical provider may exist
- Not a long-term solution for chronic illness
Moving to a new area can be fun and exciting, but it can also be expensive. Costs can include things like hiring movers, renting trucks, paying rental deposits, setting up new utility accounts and buying packing supplies. If you’re in the process of moving somewhere new and you’re worried about covering all the expenses, a personal loan might help you to bridge the financial gap.
- Covers all costs of moving
- Fast funding available
- Less expensive to DIY
- Can interfere with a home loan
When you have several different outstanding debts, it may be confusing to keep up with making several different payments. Additionally, some of your debt may be quite expensive if your financial situation has changed since you last borrowed. Personal loans can sometimes be used to consolidate all of your debt into one single loan. This gives you the ability to make one payment a month instead of multiple, lower your overall interest rate and save some serious money. Read more about debt consolidation loans.
- One monthly payment
- Saves borrower on interest
- Can shorten credit history
- Another application subject to fees
Paying for a wedding
If you have an upcoming wedding on the horizon, you may be considering taking out a personal loan to pay for all the expenses. Things like caterers, rentals, florists, alcohol and venue rentals add up fast. While a personal loan may be able to help you cover the costs, it’s not always advised. Taking on additional debt for luxury purchases is a bad habit to get into, especially at the start of your new married life. Your better option is to take the time and save for your big day. If that still won’t cover the costs, you may want to look into rethinking some of the expenses for more affordable options.
- Funds a dream wedding
- Can pay for deposits
- Not fiscally responsible
- Starts marriage in debt
Home appliance repair
Many of the appliances in your home are essential to your daily life. When your refrigerator, washing machine, dryer or hot water heater goes out, you have to get it repaired. Unfortunately, much like the unexpected medical costs, home appliances don’t break when it’s convenient or when it fits our schedules. Personal loans are a great way to cover the cost of an emergency home appliance repair.
If you’re unable to get a personal loan, you may want to see if the appliance manufacturer has some form of payment plan. Many providers even offer no-interest loans to spread out the costs of the appliance, which would always be a better option than a personal loan.
- Can cover 100% of the cost
- Fast funding available for emergencies
- Cheaper payment plans could be available elsewhere
- Warranty programs may be less expensive
Start a Business
The freedoms and flexibility that come with owning your own business are great. You can make your own schedule, be the boss, and all the work you do benefits you. But starting a business does cost money. You need to pay for things like licenses, supplies, marketing, and more. A personal loan for businesses may be a good option to get started on your way to turning that side hustle or unique idea into a full-fledged business.
- Doesn’t require a business plan for approval
- Collateral not required
- Smaller capital amounts than business loans
- Not as versatile as lines of credit
Cover unexpected expenses
Anytime you encounter unexpected expenses, a personal loan may be able to help. It’s critical, though, that you properly and honestly assess whether or not the unexpected expenses are a need or a want. If your video game system unexpectedly breaks, that’s probably more of a want than a need. If your car breaks down and you have to get to work, that is more of a need than a want. Prioritize using personal loans for your needs and develop savings plans to cover the cost of your wants.
- Extremely versatile in the uses of the loan
- Same-day or next-day funding available
- Better to use savings instead
- Could perpetuate a debt cycle