Why Personal Loans Are a Good Choice

 Here’s a look at the advantages of personal loans.

Couple sits on a couch looking at finances on a tablet.

What are the benefits of personal loans? They can help you consolidate debt, pay for home improvement projects, cover emergency expenses and more. Personal loans can help you save money, too. As life changes, so do your dreams.

Maybe you’re considering a major landscaping upgrade, a second honeymoon, or you want to take steps to reduce your debt.

Personal loans are a great way to help you accomplish these and other goals. They often offer interest rates in the single digits, providing an excellent alternative to high-interest rate payday loans and credit cards. Since personal loans can be used for personal reasons, there’s no need to put those passion projects or experiences off until a later date!

Here are some of the best ways to use a personal loan.

Consolidate Debt

Simplify your budget and save money by consolidating your debt into one low monthly payment. Using a personal loan to pay off medical bills, high-interest-rate private student loans, furniture store financing, etc. allows you to make one payment, thereby reducing the number of bills you have to track and pay each month. With only one payment to make instead of several, the likelihood of making on-time payments increases, reducing the chances of late fees or negative marks on your credit report. A personal loan can also offer you lower interest rates on the new single payment loan.

Fund Home Improvement Projects

Home improvement projects can increase the market value of your home. Whether you’re looking to sell your home now or 10 years from now, adding a new room, updating a kitchen, or remodeling a bathroom are smart ways to make improvements that can pay off long-term. In many cases, a home equity line of credit (HELOC) loan is a great way to finance fixer-upper projects. However, personal loans can be a nice alternative to HELOCs, especially if you don’t have enough equity in your house.

Cover Emergency Expenses

Financial emergencies can drain even the best-funded emergency savings accounts. You may have worked hard to save six months of living expenses, but a recent financial crisis brought your balance to zero - and you still have costs to cover. Instead of tapping into your retirement savings, applying for a payday loan or turning to your high-interest rate credit card, opt for a personal loan. This can be a low-interest option to cover the remaining expenses brought about by the emergency.

“You Name It” Loan

When you’re short on savings for an upcoming special event, a personal loan could be a viable solution. If expenses are more than you had initially planned or prices have changed since you began researching your special event, a personal loan might help. Weddings, second honeymoons, and milestone birthdays are some of those once-in-a-lifetime events that may require an additional influx of funds to make them unique and memorable.

A personal loan can also be used to finance special purchases such as motorcycles, sport-utility vehicles, RVs, etc. You decide what you want to use the money for – you name it!

Be Smart with a Personal Loan

A personal loan is still a loan that requires on-time repayment. Loan approvals are based on your credit. On-time, late or missed payments are reported to the credit bureaus and will likely affect your credit score and future borrowing rates and terms. As long as you repay the personal loan as agreed and the payments fit your budget, it can provide the cash infusion you need.

Here are some additional considerations when deciding if a personal loan is the best choice for your financial situation.

  • Can you repay the personal loan without spreading yourself financially thin?
    • Add the anticipated loan repayment amount to your budget. Confirm that the additional payment doesn’t use all your surplus income.
  • What’s the shortest repayment term you can comfortably afford?
    • Review your budget. The quicker you can pay off your personal loan, the more money you can save towards your financial future.
  • Do you have good credit?
    • The financial institution will pull your credit report when you apply for a personal loan. To qualify for the lowest rates, you’ll need good credit scores.
  • Do you need the money over a period of time or in one lump sum?
    • Personal loans are disbursed in one lump sum into your account. If you need money over a period of time, consider a reserve line of credit. A line of credit has a preset borrowing limit which allows you to access the funds as you need them.

You can save money and reach your financial goals with a personal loan. Interested in taking the next step? Consider getting a personal loan at UW Credit Union. We’re here for you!

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