A personal loan can fund virtually any financial need, from home improvement to debt consolidation. When you take out a personal loan, you get from the lender a lump sum to repay in fixed installments with interest. The timeframe for paying back a personal loan ranges from 12 to 60 months, and these can be either unsecured or with collateral. Here are a few reasons why you should get a personal loan.
It Can Help Refinance Your Credit Card Debt
A high-interest credit card is a double-edged sword. While it can help you with big-ticket purchases, it can also burden you financially later on and prevent you from reaching your goals. If you have a revolving credit card balance, you pay compounding interest on items already purchased.
Meanwhile, personal loans offer fixed monthly payments. It is easier to keep track of them than variable rates on credit cards. Refinancing your credit card debt using a personal loan means you access lower, fixed annual percentage rates (APRs) at a definite repayment schedule.
It Enables Consolidation of Multiple Types of Debt
You can use personal loans to consolidate different types of debt into a single fixed monthly payment. When you do this, it is easier to track your bills and pay them off since you have a set schedule. Also, because you have lower APRs, more of the payments go to the principal balance, making the repayment period shorter.
Note, though, that some of your current debts could have a lower APR than any personal loan you could get. Personal loan origination fees could also take away from whatever savings you might get. As such, you need to compute the figures using a debt consolidation calculator or talk to a trusted broker.
It Allows You to Finance Home Improvement Projects
Renovations increase the resale value of your home and make it more livable. You can finance home improvement projects using personal and home equity loans. When you take out an unsecured personal loan to renovate your home, you do not need to worry about having to back your home. Meanwhile, a HELOC or home equity line of credit will require you to put your home as collateral. If you fail to meet your payments, the bank will take your house.
You Can Use It for Large Purchases
Personal loans can pay for a sizeable miscellaneous purchase. It's best to have a budget for emergency expenses so you can pay in cash, but sometimes it is not possible. You can take out a personal loan to buy a replacement for an appliance that breaks down, a major car repair, or other urgent needs.
You could also use a personal loan to pay for a car, but it's best to go for auto loans in this case. An auto loan is easier to qualify for than an unsecured personal loan. However, like a HELOC, an auto loan requires you to put up the item you're purchasing as collateral, meaning you could get your car repossessed if you don't make your payments.
It Can Help Pay Off Medical Bills
Though most people strive to stay healthy, no one can predict when an illness would strike. If you find yourself swamped with medical bills, it could be challenging to repay all of them at once. You could use a medical loan to cover treatments and hospitalization costs, but you should still explore your options.
Besides taking out a personal loan, negotiate your bills or enroll in a no-interest payment plan. You could also ask about medical credit cards that allow you to repay your bills within a specific timeframe, with interest.
Can I Cover Business Expenses with Personal Loans?
Lenders do not typically offer personal loans for business expenses. When you take out a personal loan, your credit is on the line, and if the business does not succeed, you could damage your credit score. Also, a personal loan has lower borrowing limits and higher APRs, so you'll be paying more over the loan period. Some new business owners could struggle with lenders' stringent business loan requirements, though, which is why they use personal loans to launch their venture. It is a high-risk, high-reward situation that needs careful planning and studying.
Personal loans can help you cover sudden expenses like repairs, replacements, and hospitalizations. Carefully study the pros and cons before taking out a personal loan, and make sure you get a lender who can understand your needs.
Magnolia Finance is a lender committed to making it easy for you to gain funds for your needs. Our same-day personal loans range from $202.75 to $1785.50 and have clear repayment plans. Whether you're consolidating debts, paying for an urgent need, or building your credit, we have you covered. Get in touch with us today for details!