Home loans, auto loans, student loans — they’re all self-explanatory. Borrowing money for personal expenses (a personal loan) is much more open-ended than loans designed specifically to pay for a home, car or education.
Most often, people use personal loans to consolidate their debt, according to an analysis of loan requests made in 2015 through LendingTree, an online loan marketplace. Among people who provided a purpose for the potential loan, 39.55% said it was to consolidate debt.
That’s a pretty standard use for personal loans. It can be easier to keep track of one loan payment, as opposed to many, and interest rates tend to be lower, hence the appeal of debt consolidation. Still, the name “personal loan” is open to interpretation. You may not have thought of it, but you can do all sorts of things with personal loans. And according to the LendingTree data, people do.
1. Green Loan
Home renovations to make your home more environmentally friendly can save you money in the long term, qualify you for certain tax benefits or help you reach your goals of improving your home’s energy efficiency or reducing your carbon footprint.
2. Wedding Expenses
The average wedding costs more than $30,000, according to the most recent estimate from wedding website TheKnot. That’s a ton of money. As a result, some people use wedding loans or credit cards to help them cover the cost.
If you haven’t established a line of credit for your business (or are starting one from scratch), you may consider using a personal loan to get things going.
Airfare, dining out, lodging — those things add up quickly, especially if you’re taking the entire family on a trip. Using some money-saving vacation tips can stretch the loan to maximum enjoyment.
5. Home Buying
The average amount LendingTree offered for a home loan in 2015 was $13,881.63, so obviously that’s not what people used to actually purchase a home. There are all sorts of costs associated with buying a home, like a down payment and closing costs, but financing those expenses would be factored into your debt-to-income ratio, which affects the mortgage process.
6. Major Purchase
Say you want or need to buy something that won’t fit into your regular budget, like furniture, appliances or a new computer. You could save up for it, but financing it with a personal loan could also be an option.
7. Medical Expenses
Health insurance can help make unexpected medical issues more affordable, but it doesn’t cover everything. (And if you don’t have insurance, you’ll have to pay a lot.) Rather than face your medical bills going to a collection agency, you may want to repay them with the help of a persona loan.
8. Moving & Relocation
Moving house is anything but cheap. Even if you’re not paying for professional movers, transporting your stuff to a new place can cost a lot of money, not to mention the fact that you may have to pay a security deposit at your next home, among other things.
9. Home Improvement
Whether you’re doing it yourself or hiring professionals, a home makeover (even a single-room makeover) has all sorts of costs.
10. Car Financing
You could get a traditional auto loan, but it’s possible you could find more favorable terms with a personal loan. It’s always a good idea to shop around and try and find the best deal.
11. Credit Card Refinancing
Personal loans often have lower interest rates than credit cards, which can make those balances cost less in the long run, as you pay them off. If high credit card balances are dragging down your credit scores, using a personal loan to pay them off can help you improve those damaged scores. You can see how your credit card debt and other loans affect your credit by checking your free credit scores once a month on Credit.com.
More Money Saving Reads:
- Credit Cards for Poor Credit
- Credit Cards for Fair Credit
- Is Chase Freedom’s 5% Cash Back Right for You?
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