5 Ways to Utilize a Personal Loan

Even if you set a budget and stick to it, work hard to save money and set some aside, there are still times in your life when you may need to take out a personal loan. Personal loans can be used for almost any expense, including debt consolidation, home improvement projects, large purchases and emergencies.

Here are some of the most common ways to utilize a personal loan:

1. Debt consolidation or refinancing

If you carry multiple forms of debt, you can use a personal loan to consolidate it. A debt consolidation loan combines unsecured debts like credit cards and medical bills into one payment, ideally with a lower annual percentage rate. This approach saves you money and can help you pay off the debt faster.

A similar reason to get a personal loan is to refinance an existing loan. It works the same way as a debt consolidation loan: You take out a new loan with a lower interest rate to replace an existing loan.

Refinancing a personal loan can be a solid option if your credit score or income has increased since you first got the original loan, which means you may qualify for a lower interest rate. Check if the new loan comes with an origination fee that could offset what you’d save in interest costs.

2. Home improvements or repairs

You can use a personal loan to fund a home improvement project, like a new roof or kitchen remodel — or a home repair, like a broken window or leaky pipe. Financing home improvement work with a personal loan can help to increase your home’s value.

Personal loans are typically unsecured loans, which don’t require your home or any other asset as collateral. While most personal loans have repayment terms up to seven years or less, some lenders offer longer terms for home improvement loans.

3. Medical bills

Personal loans can be used to cover medical, dental or other health care costs, like an emergency procedure, fertility treatments, costly out-of-network charges or a high deductible. Borrowers can also use a personal loan for elective procedures.

4. Life events and discretionary expenses

Most financial experts don’t recommend using a personal loan for discretionary expenses. However, some big-ticket life events may require outside financing. Just make sure you can comfortably afford the monthly payments on the loan.

A wedding, for instance, can cost more than $30,000. Not every couple can pay those costs outright, but that doesn’t mean they have to scrap all their wedding plans. Wedding loans are one way to cover the difference.

A big, bucket-list vacation can add up, too. Though “fly now, pay later” payment plans are becoming increasingly popular, traditional vacations loans are another option to cover a dream trip.

Some expenses you may choose to use a personal loan for are:

• Weddings
• Vacations
• Funerals
• Moving
• Furniture
• Technology devices
• Adoption or family planning procedures

5. Emergencies

If you need to fund an emergency, a personal loan can see you through. For example, if your car breaks down, you might need to borrow money to cover repairs and the cost of a temporary vehicle rental.

Several lenders offer next-day funding for personal loans, but if you need money even sooner, some offer same-day funding. Look for personal loans with maximum APRs no higher than 36% and monthly payments you can handle.

Personal loans are typically a more affordable choice than a payday or pawnshop loan, both of which can charge triple-digit interest rates. However, long-term, interest-bearing debt may not be your only option in a crisis.

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If you are in need of a personal loan, stop by your local First Federal Bank branch, or apply online. We offer a number of lending solutions to meet your needs!