Alternative Uses of Personal Loans

20 Apr 2019

There are plenty of reasons to take personal loans for diversified needs. There are many alternative uses of personal loans which otherwise you cannot pay off by using credit cards. They can be used to make credit card payments, debt consolidation, home renovation, relocation expenses, wedding expenses, funeral expenses, going for a vacation etc. The best thing about personal loans is you don’t need collateral, unlike other financing options. In this type of loan, you borrow a specified sum that you need to repay in equal monthly installments, unlike credit cards which might tempt you for heavy expenditures. You can use personal loans for almost any purpose. Here are some of the alternative uses of personal loans

Most Common Uses For A Personal Loan

Debt consolidation

Managing different amounts/kinds of debt with different creditors can be a headache at times, with each debt having its own mode of payment, interest rate and deadline attached to it. As it happens, we end up missing the payments due and paying more interest as a result.

One of the basic purposes of personal loans is to simplify bill payments by consolidating all debts into a larger, yet single piece of debt. You can decide to bring all your debts to one place and pay them as monthly EMIs. It will be easier to settle the outstanding debts in a fixed timeframe.

Moreover, debt consolidation through a personal loan can help you a great deal to reduce your EMIs, decrease your interest rates and shorten the time required to pay your debts off. Credit card interest rates are usually much higher than that of a personal loan. If you can pay off all credit cards by availing a personal loan, you can save a lot on your debt repayments.

Home Renovation

A personal loan can be a great financial help if you are looking forward to revamping your house. Whether you want new furniture for your house, want to change the interiors for a fresh look, want to put wooden flooring or set up a modular kitchen, personal loans will bring money to your pocket that you can spend wisely for a home makeover.

You may very well decide to opt for a home equity line of credit or a home equity loan for your home makeover as these usually come with a lower APR than personal loans and the interest is also tax deductible. But the downside of these loans is that you need to put your housed property at risk when you borrow against the same. This is not a scenario with a personal loan which is not secured through your home. Also, you need to incur associated costs such as closing costs and home appraisal cost, when you want to avail a home equity line of credit or a home equity loan. All these factors combined, availing a personal loan for home renovation may be a better proposition for you.

Credit Card payments

One of the greatest rewards of using a personal loan is to pay off your credit card bills at the lower interest rates. It means you can get rid of your outstanding higher-interest debts in lesser time with a personal loan. This will save you a significant amount of money and you will have only one monthly repayment to make, instead of having to make multiple repayments to multiple creditors.

Wedding Expenditures

The wedding is something which is a one-time affair and everybody wants to make a big deal out of it at any expense. Personal loans for wedding purpose can be used for various events supporting a wedding such as a flower decoration, wedding trousseau, candid photography, catering etc. Being a special day, wedding often comes up with a lot of unexpected, sudden and ‘out-of-budget' expenses and you may need to pay a major chunk of these in cash too. A personal loan can give you absolute peace of mind in such situations.

Relocation expenses

Relocating to other places may become necessary for you when you need a better space for your family, reduce your existing housing cost or when you get new career opportunities.

Moving from one house to another in the same city is not costly but moving from one place to another can be a costly affair. Personal loans can prove to be really helpful in case of financial scarcity for long-distance relocation for a job opportunity. These funds can be used for packing the belongings, booking a truck and transporting it to a new location. Just be sure that in future you will be having enough funds to repay the personal loan otherwise it can affect you negatively.

Funeral expenses

Funeral expenses are often neglected while discussing the alternative uses of personal loans but on the contrary funerals can be very expensive and not having enough money to cover for them can be really embarrassing. The last thing anyone would want to think about after the death of a loved one is how to meet the expenses of a proper and dignified burial.

A personal loan can provide him/her the requisite funds so that he/she can pay for the funeral costs along with other associated expenses such as the casket, transport equipment, cemetery plot, the casket etc.

Medical expenses

This is one category for which most of the personal loans are taken. There are certain medical procedures which are generally not covered in health insurances and therefore these loans can provide a great deal of help covering these medical expenses. To name a few, dental surgery, cosmetic surgery, fertility treatments, medical travel, aftercare medications can be financed using personal loans. A personal loan allows you to avail the treatment you require, without any delay and helps you to pay your bills off in time.

Purchasing/Maintaining a vehicle

A personal loan can be applied if you want to purchase a four-wheeler that requires heavy expenditure. Most people aren’t rich enough to pay the whole amount in one go so they opt for personal loans and find it easier to pay them off as monthly installments.

Also, when you buy a car and get used to it, you simply can't afford to remain without it. Car repairs and maintenance can be a costly affair and if you can't make immediate repairs (due to a scarcity of funds), the problems usually become worse. A personal loan can help you in such a juncture and it can provide you with necessary funds to get your car ‘back to work' sooner than later.

Planning a vacation

An average vacation in the same country might not require you to go for a personal loan, but if you are planning for a dream vacation with fancy hotels to stay in and luxurious restaurants to dine in, then definitely you would like to opt for a personal loan as it can cost you a fortune. Just as personal loans help you with your dream wedding, they also can be used to help you explore the places around the world. You can fund your honeymoon or an anniversary celebration using these loans. A personal loan is definitely a more viable solution against a fund crunch in such situations than a credit card which often comes with a much higher interest rate.

Starting a business

If you wish to start a business and do not have either a business credit card or a current account, a personal loan with a low interest rate can cover for the capital required to set up your business. You can always pay the loan off instantly, once your business flourishes.

Cover education expenses

The cost of college education in the U.S has been increasing ever so steeply every year. In a survey conducted by the College Board in 2017 revealed that the estimated annual budget for any moderate college is about $25000. A personal loan can come to the rescue in such a scenario where you can use the fund to cover college tuition and all other related college expenses.

Conclusion

While there are numerous reasons to opt personal loans, you should be aware and cautious while applying for them as you will have to pay them back with interest. When you take out a personal loan to plan a vacation or a dream wedding, you are borrowing money from some lenders which you need to repay at a specified time. Personal loans are a great way to make major investments without financial trauma but be sure to use them sensibly.