The Top 3 Reasons People Use Personal Loans
Personal loans are very attractive to many borrowers for a number of reasons. They are generally easy to apply for, making it a convenient option for financial needs. In addition, personal loans are unsecured, which means borrowers do not have to provide collateral for the loan, and they offer structured repayment terms that are easy to understand.
Many borrowers consider personal loans for a variety of situations, although there are three reasons most people take out a persona loan:
- Debt Consolidation – Personal loans are commonly used for consolidating a wide range of debts, such as credit cards, store cards and other types of short-term loans. Personal loans often offer interest rates that beat out many credit card APRs; therefore, it is common for borrowers to use a personal loan to pay off credit cards with higher interest rates.
Personal loans are also popular because they also allow borrowers to transfer several monthly bills into one, easy monthly payment.
Be careful about consolidating credit card debt to a personal loan, however, as many borrowers have simply charged up their credit cards once again, thereby putting themselves back into a financially precarious position.
- Purchasing a Vehicle – Many consumers use personal loans to purchase either a new or used vehicle. For the most part, however, it may be less complicated to apply for a personal loan than to apply for credit through a car financing company. Make sure to compare rates between auto lenders and personal loan lenders before deciding upon a personal loan to cover the purchase of your new or used vehicle.
- Home Improvements – Home improvements are another popular use for personal loans, as many homeowners use the cash to make repairs, renovations or upgrades. The interest rate on personal loans is typically lower than home improvement store credit cards and financing through a construction or home improvement company.
Also, keep in mind that your home improvement can potentially raise the value of your home, thereby making a personal loan to accomplish certain home improvement jobs quite practical.