A personal loan can offer a simple borrowing solution when you need it the most. Because a personal loan can be used for a variety of reasons and typically doesn’t require collateral (such as your home or a vehicle), it can make a tough financial situation slightly easier. Let’s walk through situations where a personal loan may provide a beneficial solution.
1. Debt Consolidation
Today’s increased interest rates can make credit card debt and medical debt a major hindrance on personal finances. If you have multiple debts, such as credit card balances or medical bills, managing them can feel overwhelming and stretch the budget too thin.
A personal loan lets you consolidate eligible debts into one single loan with a fixed monthly payment. It’s also possible for your debt consolidation loan to have a lower interest rate than your current loans have, which can save money in the long run. Having a singular payment simplifies your finances, making it easier to keep track of your expenses each month.
2. Dealing With Emergency Expenses
One of the few constants in life is how an emergency never happens at an ideal time, including when finances are involved. Medical emergencies, car repairs, and unexpected home maintenance costs are all examples of major expenses that can devastate our finances.
If you don’t have an emergency fund saved up, a personal loan can provide the funds you need quickly. These funds can also help you avoid using high-interest credit cards or depleting your savings.
3. Funding a Major Purchase
Furniture, appliances, and major car repairs are all examples of purchases that can heavily strain a budget. Purchases like these can drain your savings or take years to save up for. If you need to make a large purchase and do not have the cash on hand, then a personal loan can provide quick funding so you can get what you need.
It’s always important to keep in mind that the investment should be something you really need and you can comfortably afford the monthly payments for, otherwise, it can lead to a cycle of debt that can be difficult to end.
4. Covering Major Life Events
Like emergencies, major life events may not always occur on our desired timetable. Weddings, adoptions, and anniversary celebrations may bring joy to a household, but these are often riddled with high costs. A personal loan can help to make the expenses more manageable.
5. Making Home Improvements
Improving your home can increase its value and enhance your living space, but it can cost a fortune too. If you have plans for renovations but don’t have enough savings to cover the costs, a personal loan can provide the necessary funds to help you increase the value of your home.
6. Establishing or Building Credit
Taking out a personal loan and making timely payments can help establish and improve your credit score. It can offer you a greater credit mix plus reward you for on-time payments, which in turn establishes a more positive credit profile.
A higher credit score can lead to better loan options and interest rates in the future, but taking out a loan for credit improvement purposes can be a risky move if you can’t make the payments on time. Always be sure that you only borrow what you can afford to pay back.
Peoples National Bank of Kewanee understands just how personal a personal loan can be. If you’re curious whether a personal loan is a good idea for your financial situation, talk to our lending experts and see what options you have available through us.
