If you’re like most Americans, you don’t have quite enough in your savings account as you want to.
You’re also likely to have about $6,000 or more in credit card debt. This means that sometimes, you just can’t finance the things you need or want for your life. Truth be told, you’re about one surprise expense away from a serious financial problem.
So, what’s the solution? For many in a financial bind, it’s a personal loan.
What can you use a personal loan for, and why is it a viable lending option when so many other types of loans are not?
Read on to learn what you can do with a personal loan, and why it might just be the financial saving grace you need.
1. Freedom with the Funds
So, what are personal loans used for?
One of the most appealing aspects of a personal loan is that you can use the money in any way you wish.
You don’t need to present the lender with a business plan, send a letter of financial hardship, or get any sort of approval about the way you want to use the funds.
Personal loans are often used to pay for home repairs, finance a wedding, pay for education expenses, help with buying a car, or even pay for birth or funeral.
Many other types of loans require the lender to approve the reason for the loan. So, personal loans are one of the most flexible options around.
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2. Use Them to Build up Your Credit Score
You know that it can feel impossible to get approved for a larger loan if you have a bad credit score.
However, if you’re able to pay back a smaller personal loan on time and in the full amount each month, you can use it to rebuild your credit.
It gives you the chance to prove to future lenders that you’re capable of borrowing money and paying it back within the loan terms. Plus, it gives a serious boost to your credit score in the process.
3. A Simple Application Process
Loan companies know that most people don’t want to have to spend an entire day — and provide personal information — filling out a loan application.
The great thing about personal loans is that they have one of the simplest application processes around. Plus, they don’t require nearly as much information as you might think.
You’ll need to provide a proof of residence, a proof of income, and an active bank account. You’ll also need to be between the ages of 18-65.
Each lender obviously has its own specific requirements, but these are the general rules.
4. A Great Way to Consolidate Your Debt
Dealing with credit card debt, student loan debt, or even behind on your car payments?
Believe it or not, personal loans can be an effective way to consolidate or even pay off your debt.
Why? Because they have much lower interest rates than credit cards, and sometimes, even lower interest rates than your outstanding loans.
Plus, when you’re making one payment per month instead of several, it’s much easier to keep track of your expenses.
5. The Chance to Fund Your Business
Crowdfunding is not your thing? Can’t get approved for a small business loan because of your poor credit history?
If so, then you might consider using a personal loan to help you finance your business. You can get generally get loans for up to $50,000, and some lenders are even willing to offer you more than that.
Just make sure that the high interest rate on larger personal loans doesn’t make it end up costing more than it’s actually worth.
6. Fast Approval Times
Another huge benefit of personal loans?
They have a notoriously short overall approval process. In some cases, you may be approved for your personal loan in as little as 24-48 hours, depending on the lender. (If you want to prioritize a fast approval process, look for an online lender.)
Plus, they pay out the amount of a loan in a lump sum, meaning that you’ll get all your money at once instead of in installments.
If you need to finance a big purchase or pay for an emergency expense in full, these loans can help make it happen.
7. The Ability to Create an Emergency Fund
Roughly 40% of Americans say they don’t have the cash on hand to cover even a $400 emergency/surprise expense.
If you’re in this situation, then even applying for small personal loans can give you enough cash to create your own emergency fund. This way, you won’t face financial ruin over medical bills, home or car repairs that can’t wait, or any other kind of unexpected expense.
Plus, knowing that you have money there to help if times get hard just makes it easier to sleep at night.
Ready to Apply for a Personal Loan?
Now that you know everything that a personal loan can offer you, it’s time to start researching potential lenders.
Make sure you compare interest rates, loan terms, and research the history of the lender as a whole.
Looking for tips on the best personal loan companies? Curious about lenders that are willing to work with borrowers with poor credit? Want to explore your other options when it comes to loans?
Our blog covers the topic of loans frequently, so keep checking back in with us to ensure you don’t miss out.
We’re also here to provide you with solid, no-nonsense financial tips that will help you to get your credit back into fighting shape.