What Is A Personal Loan?
Quite simply, a personal loan is money that you borrow from a financial institution or online lender that you pay back with fixed payments. The payments could be a one time single payment, bi weekly, monthly, etc. Every personal loan is different and they all carry different terms.
Personal loans will have interest and/or fees that will be paid back to the lender in addition to the principal or money borrowed. The rates and fees charged will depend on the lender and your credit worthiness.
The typical personal loan will be unsecured which meant that no property is put up as collateral. Occasionally, a personal loan may require collateral or property that you put up to guarantee the loan. If you default on the loan, the lender can seize and sell your property to satisfy your obligation.
Personal loans, like all loans are serious matters and borrowers should consider the worthiness of a loan and whether they can afford to meet the obligations. Having said all of this, let’s look at what you can use a personal loan for.
Uses For Personal Loans
A personal loan is incredibly versatile and can be used for just about anything. Here are some examples.
If you need to make home repairs, a home equity loan is usually the best option. If you do not have enough equity, a personal loan might be the way to go. You can use the money to put in a new kitchen, install an outdoor kitchen or to get a zero turn mower to kick your lawn care up to the next level.
While it is best to save up money for your vacation or simply take a budget vacation, sometimes there is an opportunity too good to pass up. It might be a deal that will ultimately save you money or it might be a family event that you just can not miss.
A personal loan can allow you to go ahead with your vacation without going through months or even years of savings.
One of the best uses for a personal oan is to consolidate debt. With the average interest rate being 17 percent and most households having almost 20,000 dollars in credit card debt, it is easy to see how consolidation can help.
If you have decent credit, you can roll all of those high interest credit cards into a single personal loan and save big. Possibly save thousands a year in interest while lowering your monthly bills.
To Treat Yourself
Although not advised, many people use personal loans to treat themselves with something that they otherwise would be unable to afford. A loan could help them get an engagement ring, get a fishing kayak or even afford a new pet.
The truth is, in most cases, when you get a personal loan, you can use the money for anything that you want.
Should You Get A Personal Loan?
This is a question that only you can answer. There are times when one of these loans makes sense and there are times when they do not.
If you are using a personal loan to eliminate your high interest credit card debt, it is probably going to be a good deal. This is, of course, assuming that you can obtain a lower interest rate.
If you are taking out a personal loan for something that you can do without, the answer is less clear. If the interest rate and loan terms are good, it might be a good deal for you. If, on the other hand, the interest is high and the payments might be hard to handle it is likely not a good choice.
Ultimately, it is you who knows your finances and knows whether you should or should not take out a personal loan. Use your common sense and do the right thing.