Personal loans are very popular. So you’re in the right place if you’re wondering what you can use them for. Personal loans are often known for their versatility and there are a few reasons people may borrow money.
Personal loans can help you achieve quite a few of your goals. It’s important to educate yourself on how this type of loans work before you apply for one. This article will get into the most frequent uses of short-term loans.
How Do Personal Loans Work?
They can be any amount. You can qualify for a loan of up to $10,000. That amount is then paid back in small repayment amounts. The repayments include interest and any loan fees. You can choose how many months you would prefer to pay back the loan. For example, you can choose a maximum of 36 months to pay back $10,000.
To qualify for a loan, you need to prove you can pay it back. To do this you need to provide details about how much you earn and your credit history. Credit history shows that you have paid the debt in the past and that you are responsible with credit.
Personal loans usually have affordable interest rates. Your interest rate may be higher if you have a poor credit history. Loan providers should tell you all the fees upfront and your interest rate before you borrow the money. They should also let you know exactly how much you need to pay every week/fortnight/month.
If you are earning enough money to cover the repayment amounts then you are in a good position to get a short-term loan. You should also think about how you would pay back the loan if your financial situation changes.
What Can I Use a Short Term Loan For?
The list below is a sample of how you can use a personal loan to fund your expenses. To give you a complete list would be impossible to compile! These are some very common reasons people take out short-term loans.
1. Student Expenses
An actual dedicated student loan works great for covering college tuition fees. Student loans will have better interest rates than most other loans. But you will have many other expenses while studying. These include accommodation, monthly food and travel expenses, or even a new laptop.
Many people might start with a credit card to make ends meet while studying. A wiser choice may be to use a short-term loan. This is because they have a fixed interest rate and aren’t a revolving debt like credit cards.
It will also help you build a better credit score at this early stage of your financial journey! But, you must get into the habit of budgeting before you take out a personal loan. There is no other way to know if you’re able to pay it back (unless you are aware of where your money goes every month).
2. Debt Consolidation
If you have more than one form of debt, it can be overwhelming to pay them off every month. There may be multiple credit cards or other loans that you’re struggling to make payments on. One solution is to group them together and create a payment plan.
You can then calculate the amount and timespan of a personal loan. The personal loan must be cheaper than paying off your other debt. This means it should have a lower interest rate/fees than your other loans and credit cards combined. If not, you will be getting into more debt.
3. Emergency Medical Bills
If you don’t have any savings for emergencies then getting cash fast is important. That’s what makes personal loans a convenient option. It may be better than getting a credit card (as mentioned above) and can prevent long-term debt.
As for medical bills, always try to negotiate the price down. Your healthcare provider may agree to this if they know your situation. Or they may allow you to make monthly repayments. In this case, you won’t even need to take out a loan in the first place.
4. Home Maintenance
It’s so annoying when your roof has a leak or your plumbing bursts! Even bug infestations and rubble removal can be expensive issues to address. Since repairs and maintenance are usually something you pay for once-off, you may want to consider taking out a loan to cover it.
Try your best not to mix up repair needs with a strong desire to renovate. Only take out loans for essential home maintenance. If you want to improve the aesthetics of your house, rather save money every month for this specific goal.
Most people love to travel! A good holiday is worth every dollar. However, you must have a detailed repayment plan if you decide to do this. You need to know exactly how much disposable income you have every month.
Disposable income is the money left over after you pay for essentials like rent and groceries. If this isn’t enough to make loan repayments, try adjusting your budget. Or you can wait a few months and save small amounts of money to cover half of the holiday. Then you can take out a loan to cover the other half.
6. The list doesn’t end here
There are so many uses for a personal loan, and there are many lenders who offer this type of credit. The main thing is whether you can afford it. Your loan provider will determine this. Just make sure to always make good on your repayments.
If you have any questions about personal loans or would like to apply, contact Credit24. We are a market-leading provider of personal finance and fast loan approvals.