What do I use a personal loan for?
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UPDATED: Dec 13, 2011
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Borrowers can use personal loans for just about anything! From getting a small business up and running to funding that special vacation a couple has always wanted to take, personal loans are very versatile forms of financing.
Historically, personal loans were reserved for those looking to make larger, material purchases. These material items included kitchen appliances, refrigerators, washers, and dryers. But people began seeing a lot of untapped potential in these financing tools. As a result, personal loan usage has been diverted from the lower-cost purchases and instead focuses on things of higher cost.
Some common uses include:
- Weddings. According to the Association of Bridal Consultants, the average wedding costs nearly $30,000. Unless a couple or their parents have that kind of money in their savings to spend, a personal loan can subsidize some of that cost.
- Vacations. Big vacations, including air travel and hotel accommodations, can wind up costing a lot of money. Financing these relaxing endeavors can give borrowers the rest from work or everyday life that they may need.
- Auto repairs. Even the most cautious of us run into unexpected automobile trouble. Sometimes those unexpected repairs can equate to very hefty bills. In order for a driver to keep their car moving, and to keep their means of transportation to work and social outings available, a personal loan may prove to be the right (or only) tool.
- Consolidating debt. When a borrower finds themselves over encumbered by monthly bills, a personal loan can help consolidate all of those bills (with all of their individual interest rates) into a single monthly payment. Calls from debt collectors can cease, and a borrower can rest easy by making ends meet to pay off a single monthly charge.
But borrowers need to remember that personal loans are not free money. Whatever purchase they wish to make by financing cash needs to be worth the ten to fifteen percent interest that will arise from borrowing money.
That interest can be reduced if a borrower is willing to secure their loan by putting collateral up. Usually, secured personal loans are backed by a borrower’s house, but some lenders all other forms of security.
With help from the internet, borrowers can now send requests out to multiple lenders within a matter of minutes and receive various quotes so they guarantee themselves they are getting the best possible rate.