Pay off existing debt
Of all the things you can buy with a personal loan, the peace of mind that comes with knowing you’re saving money and on a faster path to financial freedom is one of the best. Megan DeMatteo, a writer and editor at CNBC Select, notes debt consolidation is the top reason people take out loans.
Taking out a loan to pay off multiple credit cards can help simplify the process by merging several lines of debt into one monthly payment. But an even bigger advantage than convenience is the potential to save money. DeMatteo notes personal loans tend to carry lower annual percentage rates than credit cards, which means more of your payment goes toward the principal balance rather than interest. This can allow you to pay off your debt faster and for less.
Renovate your home
When you’re thinking about adding on to your home or doing some remodeling, you’ll have several options to consider, including home equity loans and lines of credit. Bankrate contributor Raija Haughn recommends personal loans as a viable alternative if you don’t have a lot of equity built up in your home or don’t want to use it. A personal loan is also a good choice for emergency repairs because you can secure funding much faster.
A home equity loan or home improvement loan offers several benefits worth considering, including lower interest rates, longer repayment terms, and the ability to borrow more. But Annie Millerbernd, NerdWallet’s lead writer on personal loans, notes a personal loan is typically unsecured, meaning you won’t have to put your house up as collateral.
Starting your new life
If you’ve met the person you want to spend the rest of your life with, you may be hesitant to enter a fresh chapter of your life with more debt than is necessary. But if your plans call for a beautiful wedding, bountiful reception, and well-deserved honeymoon, Haughn suggests considering a personal loan as a wedding gift to yourself.
A personal loan allows you to more easily cover the exorbitant costs of holding a wedding, which can easily reach tens of thousands of dollars. Haughn notes money from a loan can cover essentials ranging from the venue to attire to catering and other services. If you plan to follow your wedding with a honeymoon, a personal loan can also ensure you get everything you want out of it. By securing funds from a loan, you can splurge a bit more on first-class travel, high-end accommodations, and memorable experiences at your dream destination.
There are of course specialized loans specifically for pursuing a degree, buying a new home, and purchasing a new vehicle. Student loans, mortgages, and auto loans offer distinct advantages that make them ideal for these situations, but personal loans work in several other important cases.
If you’re considering taking out any kind of loan, make sure you cover all your bases. Research the options provided by your financial institution, speak to a professional with your questions, and weigh alternative methods of securing funds. If you’ve decided that a loan is right for you, it can be a great way to get what you need today with less financial burden.