10 Possible Benefits of Obtaining Personal Loans

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What Is a Personal Loan?
10 Benefits of a Personal Loan
1. Higher Borrowing Limit Than Other Debt
2. Lower Interest Rates Than Credit Cards
3. Collateral Is Not Typically Required
4. Easy To Track and Manage
5. Predictable Repayment Schedule
6. Repayment Term Longer Compared to Other Loans
7. Building Credit History
8. Ease in Applying
9. Fixed Interest Rates
10. Personal Loans Can Be Used For Many Purposes
Refinancing existing debt. Many borrowers take out debt consolidation loans to simplify their loan payments, ideally at a lower interest rate. You can even use a personal loan to pay off a TSP loan early. The single loan is taken out to pay off existing debts and the borrower is left with paying back a single loan. Ideally, this personal loan will also have a lower monthly payment compared to the combined total of the debts you want to consolidate. Making major one-off purchases. A personal loan can be an option to pay for large purchases such as the closing costs on a new home or a home renovation project. It could even be used for something important for your health and well being, like financing the cost of a service dog. A personal loan tends to be a better option compared to other alternatives, especially if you have a high credit score (which can qualify you for lower rates) or you need to borrow more than your credit card limit. Vehicle. Auto loans are a common type of secured personal loan, where your car is the collateral, and might be a better bet if you’re purchasing a car from a dealership — you could get a lower rate.
Home improvements. Funding large home improvement projects using a personal loan can be a good idea, especially if completing renovations helps you to increase the value of your home. Home improvements may include home electrification projects, such as replacing your gas stove with an electric stove, or finishing your basement. Vacation. Using a personal loan to pay for a vacation might be helpful if you want to make sure you don't mindlessly spend (like you might using credit cards). Getting a lump sum payment can help you prepay for certain expenses such as hotels, attractions, meals, and souvenirs. To buy land. Many lenders offer personal loans for land purchases. There may be requirements such as restrictions on the planned use of the land that you finance. Some lenders even offer land loans to help you with land improvements, preparation, and home construction. Wedding. Weddings can cost a pretty penny, and this major life event can take months of preparation. For instance, you may need to make multiple deposits months or a year in advance to secure your catering and venue. If you’re considering taking out a personal loan, try to come up with a realistic budget and get a loan amount for that size. Major emergency expense. Life happens. Even with the best of intentions (and a rock-solid budget), you could face a huge financial obstacle, like an unexpected medical bill. In this case, you might consider taking out a personal loan and stretching out your payments so you can afford it much easier than you would if you had to pay a lump sum.
Financing some types of training. Though you can’t usually use a personal loan to fund a college education (there are student loans for that), you can use personal loan funds for career development purposes. For instance, you may be able to borrow money to get a commercial driving license (CDL), certificate programs, and professional development courses.
Personal Loan Alternatives
Credit Cards
Overdraft
Borrowing From Friends and Family
Apply for a Personal Loan Now
The Takeaway
Photo credit: iStock/sorrapong
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About the Author
Sarah Li Cain is a finance writer and podcast producer focusing on topics such as credit, insurance, investing, and real estate. Her work has appeared in major publications such as CNBC Select, Forbes, Redbook, and Business Insider.
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