The most common reasons for taking out a personal loan include medical bills, home improvements and debt consolidation. But the list of possible reasons why someone might want to apply for a personal loan is nearly infinite, as the funds from personal loans can be used for almost any purpose. Very few restrictions exist. Illegal activities and gambling are not valid loan uses, and you typically will not be able to use a personal loan for college education (you’ll use a student loan instead). But that’s about it.
However, legitimately good reasons to get a personal loan only represent a small fraction of the countless motivations people have for wanting to borrow. The best reasons to get a personal loan are to pay off unavoidable, urgent expenses (e.g. hospital bills) and to make investments that will pay off in the future (e.g. home improvements that increase your house’s value).
You can use personal loans to pay for less urgent things, such as weddings or vacations, too. But it’s best not to go into debt for those kinds of expenses. The more responsible course of action is to pay with money you already have, so that if a financial emergency hits, you won’t already be in debt.
Reasons to Get Personal Loans:
- They are versatile: The most common reasons for applying for personal loans include medical emergencies, debt consolidation, major purchases and home improvements.
- They can have lower APRs than credit cards. New credit card offers have an average regular APR around 19%. The average personal loan APR is closer to 10%, and personal loans can have APRs as low as around 4%.
- They offer flexible funding. Most personal loan providers offer minimum loan amounts of $1,000 to $5,000. But their maximum loan amounts can stretch anywhere from $25,000 to $100,000.
- They have decent payoff periods. Personal loans can give you anywhere from 1 to 12 years to pay off the balance. While that’s shorter than the terms offered by some types of financing, like home equity loans, it’s a lot longer than the 0% introductory periods offered on credit cards (6 to 21 months).
- They’re fast. Most personal loan providers will approve and fund you in less than a week. And the very best options can provide funding as soon as the same day you apply.
- They usually don’t require collateral. The majority of personal loans are unsecured, although secured personal loans do exist.
- There are lots of options. Tons of lenders offer personal loans, from banks to credit unions to online companies. There are choices for people of all credit levels.
There are a lot of good reasons to get a personal loan, and a multitude of different situations in which you can use one. If you’re ready to start your search, you can compare personal loans on WalletHub and get pre-qualified with multiple lenders without hurting your credit score.
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