Life is full of unexpected expenses. Whether your roof has sprung a leak, your car needs extensive repairs, or you have mounting medical bills, you might find yourself in need of a significant amount of cash. What you need is a quick cash solution with reasonable financing terms. A personal loan might be just the finance solution to address your needs.
You might be thinking, “Why can’t I just use a credit card?”
You may have a credit card at your disposal with a healthy line of credit, but credit cards are more suited for smaller purchases or some larger purchases that can be easily paid off in a few months. Also, given the usual high cost to borrow, credit cards may not be a valid solution for larger expenses that would otherwise wipe out your savings and potentially take up to a few years to pay back.
Just think how much easier it could be to borrow enough money to cover these significant expenses and have a set time to pay it back so that the debit isn’t hanging over your head for the unforeseeable future. Personal loans provide you the cash you need to cover these meaningful purchases at a rate that is usually more favorable than your credit card can provide.
How do you know a personal loan is right for you?
You might not realize it but if you have a car or a mortgage payment, you are already using one type of personal loan. These personal loans are considered secured personal loans because the car or home is used as collateral to back the loan in the event of non-payment.
When it comes to other types of expenses, an unsecured personal loan might make more sense. If you’re using a personal loan to consolidate other debt, there’s nothing to secure it. As a result, the costs of the loan likely will be higher than a secured personal loan, but you still have a lower interest rate compared to credit cards and the ability to borrow a higher amount to cover the expenses.
While you generally can use the funds from a personal loan for any purpose, it might be best to use it for purposes that will make it easier to manage your money, such as:
- Consolidating high-interest debt
- Paying medical expenses
- Covering education costs, or
- Managing the expense of home or car repairs
However you choose to use a personal loan, just be mindful of how much you borrow, how much it will cost you, and how long it will take to pay it off. If you don’t plan accordingly, a personal loan, just like any financial tool used inappropriately, could cause more problems than it solves.