Not sure how to pay that upcoming bill? Stressing about debts looking like they’ll default and go to collections? Or, pet needs a trip to the vet?
You need a personal loan.
Applying for personal loans is easier than ever thanks to peer-to-peer lending. Online lending channels are readily available through apps! In fact, approval for microloans takes mere minutes. Of course, you’ll want to spend that influx of cash wisely.
Here are some of the reasons for personal loans.
Home Repairs and Improvements
Personal financing loans help in a pinch with necessary home repairs, like:
- Roof replacements
- Repairing the foundation
- Fixing the HVAC
- Replacing the septic
These items cost thousands of dollars and quickly drain emergency funds.
Likewise, a homeowner may take on personal loans for improvements like:
- Kitchen remodeling
- Installing a deck
- Upgrading bathrooms
These improvements increase home value. The bump in value can also help hurry the process when applying for a personal loan due to their value.
Start a Business
The average cost of starting a business is around $30000. This startup cost includes the funds needed for general expenses and assets. Though, smaller, micro businesses may start using $1000 – $5000 in startup capital.
What business could you explore with a small business microloan? A few examples include:
- Home-based businesses
- Fitness franchises
- Travel agent/booking
- Freelance services
There are many low-capital franchise options for those taking larger loans, too.
Improving Credit Scores
Those with bad credit can make improvements to their credit score through personal loans. This process creates a new credit history with an accredited lender. Your history showing timely, responsible payments quickly improves credit scores.
The process happens like this:
- You visit a local bank or online loans provider
- Request a small $500 personal loan
- Repay the loan, on time, through its terms
Credit scores should increase after six months of repayment.
Depending on where you received the loan, this payment activity reports to credit bureaus. Your mileage may vary, but this is a common tactic for those starting their credit history.
Boosting or Replenishing an Emergency Fund
A trip to the emergency room or walk-in clinics is costly. A pet suddenly falling ill in need of a trip to the vet can cost hundreds. Family members in distress calling for your help will tap your finances.
Emergency funds are kept for these types of unexpected situations.
Draining the emergency fund to pay for medical or financial disasters is all-too-common. This places you at financial risk if problems persist or another emergency happens.
This is the time to apply for personal loans.
The personal loan creates a buffer for the emergency fund. The finances are replenished and available while you rebuild, which will allow you to address the problems at hand.
Economic turmoil and stagnant wages make keeping up with bills difficult. You may live paycheck-to-paycheck with mounting debts. One financial disruption could send debt repayments out-of-sync and closer to collections.
What are common collections faced by consumers?
- Student loan debt
- Credit card debt
- Medical bills & expenses
- Outstanding auto payments
Your credit score drops when these debts pass to collections agencies. You can avoid this through small loans providing enough ‘buffer’ until finances stabilize.
You may also consider debt consolidation loans.
Debt consolidation loans pay creditors in full but create a new loan term with the company. However, this new loan structure may entitle you to lower APR terms making repayment manageable.
Improving Quality of Life
Many stressors lower quality of life when finances are in shambles:
- Increased anxiety
- Fewer housing options
- Infrequent preventative care
- Lost lifestyle opportunities
- Dangerous malnutrition
Medical bills are the No. 1 reason for bankruptcy for most individuals. The bankruptcy process creates difficulty acquiring credit and loans for several years.
A loan could provide the funds to prevent financial catastrophes through preventative care. This includes having the capital to get health screenings to discover early issues.
Going to (Or Back) to School
Federal student loans, grants, and scholarships aren’t available to everyone. And that’s bad news, considering that:
- In-state college tuition cost hundreds per credit
- Out-of-state collect tuition cost thousands per credit
Even the sensible route of attending a local community college is outside the realm of possibility for many low-income individuals or those who have exhausted all options like borrowing from family.
A personal student loan, issued by a private lender, has requirements:
- Must enroll at an accredited institution at least half-time
- Show good credit score and stable income
Major financial institutions or peer-to-peer lenders create this opportunity. The loan creates an entry-point to start a fresh career path. And, may present new opportunities through pay raises from this on-going learning.
Buying a Car
Buy here, pay here locations offer inexpensive automobiles. But buying a car may be out of your reach due to financial circumstances like being laid off or if an insurance company denied your accident claim to replace the vehicle.
The car lots you find in most towns typically offer dealer-financed loans. But, their terms are grossly disproportionate compared to loans acquired through reputable lenders.
Why choose a personal loan over the dealer-financed option? Personal loans:
- Offer better repayment structures
- Allows you to spend the money how you see fit
- Use other forms of collateral instead of the vehicle
Car title loans can cost nearly 100% higher APR than personal loans.
Many employees receive little or no paid leave at their jobs. Add the mounting work demand and pressure and it’s no wonder employees feel burnt out.
Burn-out increases anxiety and lowers job performance leading to repercussions. Vacations are a fantastic mental health breakaway from the routine. Of course, not everyone has the disposable income to afford a vacation.
Small loans can fund weekend excursions or longer trips. This creates a financial cushion while you’re away from work. On vacation, you can unwind and recharge helping you avoid burnout.
Whatever Your Reasons for Personal Loans, Use It Wisely
Regardless of your specific reasons for personal loans, taking on a personal loan requires financial discipline. But, can save you in a pinch or create the capital to improve your wellbeing. Try your best to use it wisely to maximize investments and purpose.
Like this post and want to contribute what you’d spend a loan on? Leave a comment below!