Personal loans can be a useful way to obtain extra money when you need it. For example, if you run into an emergency, you might not have the funds available to meet your needs. If you’re planning a large life event like a wedding, you may want a little extra cash to finance it. In these cases and many others, personal loans can come to the rescue.
If you’re wondering how a personal loan can be of help in your life, we’ve made a list of ways in which personal loans can be beneficial.
1. They help you pay for emergency expenses without draining your savings
Life happens, and sometimes you really need access to emergency funds. Medical bills, car repairs, or purchasing a new appliance may exceed or totally deplete your savings. This can be concerning, leaving you vulnerable to additional, unexpected future costs.
Taking out a personal loan can help you cover the costs you need to, leaving you a cushion in your savings.
2. They enable you to consolidate high-interest debt
If you have credit card debt to repay, you’re likely racking up high levels of interest each month. If interest is accumulating on multiple credit cards, it’s even more complicated to get ahead of your debt.
Personal loans enable you to better manage your debt. You can borrow money with a personal loan and use this to pay off your credit card debt. This consolidates the money you owe, gives you a fixed payment each month and you’ll have an end date for when the loan will be fully paid off.
Additionally, you can often find personal loans with lower interest rates than credit cards. This allows you to pay off your debt faster and save you money in the long run.
3. You can use them to finance your wedding or dream vacation
When life’s biggest events come around, you may not always be able to afford exactly what you have dreamed of. Whether it’s your wedding, honeymoon, or dream vacation, personal loans can help you pay for it.
4. They have predictable payment schedules
Once you take out a personal loan, the term and interest rate is fixed. Having a set amount to pay makes it much easier to plan your finances. Compared to credit cards, which have a revolving monthly payment that depends on how much you spend, personal loan payments are much more predictable.
5. Personal loans are flexible in their uses
Flexibility is one of the most beneficial aspects of a personal loan. Car loans are for cars, mortgages are for homes, but personal loans can generally be spent on pretty much anything you’d like. The lack of restriction gives borrowers the freedom to use the money how they need – whether that be starting a business, financing a wedding, or consolidating debt.
6. They may help you build your credit score
If you are working on building your credit score, a personal loan may help.
Personal loans can help build multiple aspects of your credit score, including your credit mix – the types of credit you have money borrowed on, the length of your credit record, and your credit utilization ratio. When you first take out a personal loan, your credit score may temporarily dip. However, as you pay back the loan on time every month, your credit score will build.
You may want to be cautious, though. If you don’t already have decent credit, you may not be able to take out a personal loan with a very good interest rate. High APR and fees can put you into a situation where you cannot afford to pay back the loan, overall damaging your credit score.
Remember that if you are not able to pay your monthly payments, your credit score will drop, defeating your original intentions.
7. You can borrow large sums of money than a credit card
Depending on your specific financial situation, your credit cards may have relatively low monthly limits. This can make it challenging to use a credit card to finance large purchases. This is where a personal loan can come in.
A personal loan can range in amount, usually around $1,000 to $10,000. However, some lenders may offer loans as small as $100 or as large as $100,000. These flexible sums let you finance higher costs than a credit card may allow, usually at lower interest rates.
Learn More About Obtaining A Personal Loan
If you’re interested in discovering more about the benefits of obtaining a personal loan, as well as how much money you can borrow with one, you can check out our blog post with more information on the topic.