Personal Loans get a bit of a bad rap sometimes nobody wants to end up in debt.
However, it’s also true that a little bit of debt is sometimes unavoidable.
And honestly, a little bit of good debt can sometimes help you out of a bad situation.
With that being said, it’s really important to understand which types of situations call for a personal loan and which ones don’t.
For example, taking out a personal loan just to take a vacation that you can’t afford probably isn’t a good idea.
Taking out a personal loan to buy a bunch of stuff that you can’t afford probably isn’t a good idea either.
However, there are some good reasons to get personal loans. And in this article, you’re going to learn five things that a personal loan may just be very helpful for.
Let’s dive into it,
1. A Car
If you need a car, but don’t have enough cash set aside to buy one outright, your only choices are probably to either finance a new car or take out a personal loan and buy yourself a preowned, used, or older model.
Now, financing a car is typically seen as a bad financial decision because cars depreciate so much once you drive them off the lot. Plus, a lot of people get hammered with higher interest rates and fees.
However, getting out a personal loan and then using it to buy a pre-owned vehicle that fits within your budget range—well, that will tend to save you quite a bit of money and get you a fairly good interest rate as well.
2. Credit Card Debt
If you’ve racked up a significant amount of debt with credit cards, then you might want to take out a personal loan to consolidate those debts into one simple payment with a lower interest rate.
Obviously, making a decision like this will require you to understand your current interest rates and whether or not this would be a useful idea for you in terms of crunching the numbers.
But in many cases, this is a smart decision—especially if you’re trying to get out of credit card debt.
3. An Emergency Fund
Taking out a personal loan to fast-track your emergency fund isn’t necessarily a bad idea, especially since this can help you to build your credit score because you’ll be making payments on a loan, and those payments will help you to build your credit.
Just be careful not to spend that fun on anything unless an actual emergency pops up.
Still, in the event that you do encounter some kind of unforeseen emergency—having that emergency fund available could be a lifesaver. And it just might help you to get out of a tricky situation.
4. Unexpected Expenses
Sometimes, unexpected expenses do crop up.
Maybe you need to take a trip to the doctor’s office, repair a broken part on your car, pay for school supplies for your kids, etc.
These types of expenses pop up—and they’re often unavoidable. Plus, if you don’t have the cash sitting around to pay for them outright, then taking out a small personal loan may be the way to go to cover it until you can replace the money.
5. Home Repairs
If your home ends up needing a repair, and if you don’t have the cash sitting around to effectively accomplish this repair, then taking out a personal loan may be the only way to go to get you back on track.
For example, if your washer breaks, if your pump stops working, if your hot water heater goes out, if your air conditioner breaks down, etc. these are all relatively costly repairs that getting a personal loan for probably wouldn’t be a bad idea.
Personal loans can be a useful tool for managing certain financial situations, as long as they are used wisely and responsibly.
Plus, if you’re a doctor or a physician, you can even look into physician personal loans to get special deals and better terms.
Taking out a personal loan to buy a car, consolidate credit card debt, build an emergency fund, cover unexpected expenses, or make home repairs may be a smart decision in certain circumstances.
However, it’s important to carefully consider the terms and interest rates of the loan, and to avoid using the funds for unnecessary expenses.
By understanding when and how to use personal loans effectively, individuals can make better financial decisions and achieve their goals more effectively.