7 Reasons Personal Loans May Be The Best Choice For You
When everyday people are faced with rising expenses that strain their finances, their quality of life can be significantly impacted. Good people too often suffer an injury, work-related setback, health issue, or get hit with unexpected expenses that threaten to drain retirement and savings accounts. There are also times when you could put a Personal Loan to use to make things a little better for yourself and your loved ones. Regardless of why you could benefit from a Personal Loan, having that cash on hand can change your life in meaningful ways.
What Is A Personal Loan?
A Personal Loan is a type of borrowed money secured from a credit union, bank, or lending institution. These loans typically allow people to make purchases and manage money, often beyond the cash they may have on hand or invest. Personal Loans are usually paid back with interest in fixed monthly installments. Length of repayment can vary anywhere from one to seven years in many cases.
A secured loan is often used to make major purchases such as automobiles that include some form of collateral. Personal Loans, also known as Unsecured Loans, are typically driven by credit scores and are not tied to collateral such as a car or home. Because Personal Loans can be used for a wide range of purposes and have a fast application process, borrowers can easily put the money to work right away which can quickly change the trajectory of everyday life.
1. Use Personal Loans For Credit Card Consolidation
The average American struggles with more than $7,000 in revolving credit card debt. Recent reports indicate that approximately 63 percent of people polled feel they are worse off financially than a year ago. Many point to lost jobs or lower wages, among other factors that negatively impact financial health.
One of the problematic aspects of carrying credit card debt with high-interest rates is that it creates a debilitating drain on income. Paying monthly minimums never seems to make a dent in credit card debt because the interest keeps accumulating. Securing a Personal Loan to pay off the plastic and bring the debt under one roof can be an effective way to improve your financial wellness. To see if you should consolidate your credit cards, explore our “How Long Will It Take To Pay Off My Credit Card?” Calculator.
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2. Use Personal Loans For Debt Consolidation
It’s not uncommon for working families to accumulate a variety of debts. These may include loans for automobiles, recreational products, and unexpected expenditures. What too often occurs is that hard-working people get overwhelmed with multiple monthly payouts. And as people sink further into debt, a lower credit score can result in high-interest debts that begin to exceed monthly incomes.
By transferring multiple debts into one monthly payment, borrowers can often reduce the overall interest rates and enjoy one manageable amount. Consolidating debt in this fashion means that you will establish a specific timeline when all of your debt will be washed clean. If your long-term goal is to be debt-free, consolidation through a Personal Loan may be the right solution for you. To see if consolidating debt with a Personal Loan could save you money, explore your potential savings with our “Should I Consolidate My Loans?” Calculator.
3. Complete Home Improvement Projects With Personal Loans
When relatively new homeowners require upgrades or repairs, lending institutions often want you to secure a loan against equity. This can be increasingly problematic for recent homebuyers or those who have a mortgage that is currently underwater. Regardless of your financial position, a reasonable quality of life starts with enjoying your living space.
That’s why many people apply for Unsecured Loans to make home improvements. A newly remodeled kitchen, deck, patio, expansive bathroom, or another room for a family member on the way isn’t discretionary spending. These and other home improvements are necessary for you to peacefully enjoy your home.
4. Use Personal Loans To Pay Off Existing Medical Expenses
Many lenders offer loans specifically for medical expenses. This class of Personal Loans can be secured or unsecured. Lenders typically gauge a person’s ability to make on-time and consistent payments based on their credit score, history, and average monthly income.
Banks, credit unions, and online lenders are also keenly aware that not everyone who needs a medical procedure will have a high credit rating. If no other loan is available, Bad Credit Loans are not out of the question for necessary treatments, operations, and sometimes elective medical procedures. These may include emergency hospitalizations, in-vitro fertilization, cancer treatments, and even cosmetic surgery, among many others. Although Bad Credit Loans typically carry a higher interest rate than Personal Loans, they are usually much lower than what you find with Payday Loans.
5. Personal Loans Can Help Pay For Large Unexpected Expenses
To say that life is unpredictable would be something of an understatement. Although all of us plan for financial stability in the future, no one knows when they will get hit by an unexpected bill. Maybe you are saving up to install a new heating system in your home, maybe the expected financial aid for your child’s college tuition fell short, maybe your beloved family pet requires expensive surgery. Although responsible people do their best to save and plan for the future, sometimes we all get caught off guard.
When large, unexpected expenses rear their head, it may make better fiscal sense not to touch your 401(k) or drain savings accounts. Smart money management through a short- or long-term Personal Loan can be integrated into your monthly budget by making a few changes. Maybe you barbecue on the weekend instead of dining at expensive restaurants or review your current budget to determine what is an unnecessary expenditure that can be cut for now. Securing a Personal Loan allows everyday people to meet the challenges that costly unexpected expenditures create without going backward on their journey to financial success and long-term prosperity.
6. Personal Loans Can Actually Boost Your Credit
It may seem counterintuitive, but taking on a Personal Loan's modest debt can improve your credit score. Although some people try to steer away from taking on loans, credit reports calculate income-to-debt ratios as well as repayment history, among other factors. If you are hesitant to borrow, these are ways Personal Loans can improve credit scores.
Improve Credit Diversity: A robust financial portfolio helps increase credit scores. When people have manageable credit card payments, auto loans, mortgages, and other types of loans, their scores are typically enhanced. If you do not have a diverse credit history, adding a Personal Loan to the mix could prove valuable.
Build Repayment History: Consistent loan repayments help demonstrate that you are a low risk for lending institutions. Because Personal Loans offer static monthly repayment plans over several years, they represent the very definition of steady repayment.
Credit Utilization: When borrowers leverage a Personal Loan to bring wide-reaching debts under one roof, they have an opportunity to minimize credit utilization. As the Personal Loan gets paid down, you can also reduce your debt-to-income ratio.
When people have poor ratings, it can be challenging to lead a good quality of life. One of the strategies that some borrowers employ is to secure Bad Credit Loans. If you have filed a bankruptcy or have taken a few hits to your credit due to unforeseen circumstances, Bad Credit Loans may be a solution. This class of Personal Loan often has a higher interest rate but can put you back on the path to a good rating.
7. Extra Money For Weddings, Vacation, Or Splurging
There are times in life when people can put a little extra money to good use. Imagine helping to make your child’s wedding absolutely perfect. Consider taking that once-in-a-lifetime vacation, or just splurging on an important anniversary, holiday, graduation, or another special occasion. These are the events in our lives that form priceless, lasting memories. You will remember those days long after the Personal Loan is put to bed.
At Allegiance Credit Union, our experienced lending professionals work diligently with community members to offer the lowest rates and most favorable terms possible. If you are ready to apply for a Personal Loan or have questions about your unique financial situation, contact Allegiance Credit Union today.
For more information on how Personal Loans can help you improve your financial future, review our "Personal Loans Revealed: Bust The Myths and Get The Money You Need" Guide.