Personal loans offer you an excellent way to receive money quickly. Whether a few hundred dollars or several thousand dollars, personal loans can help you pay down other loans or free up money for other reasons you might have.
Now, while there are a handful of smart ways to use a personal loan, there are also things you should never do with the money.
Here are the smart, and not so smart, ways of using your personal loan.
Consolidating Your Current Debt
If you’re like most Americans you have debt over a number of lenders. This can be from a student loan, a credit card, or to pay for emergency pet surgery. Wherever the debt came from, some of these kinds of debt will likely have high interest rates. As consolidating a credit card and student loan together isn’t always possible, your best bet is to pay off the loans entirely with the personal loan. By paying of a high interest credit card and other loans, you’ll end up saving money long term with a low interest personal loan.
Fix Your Home
If you’re looking at selling your home you will want to put some money into it. From a new roof and water heater to fixing up other issues, putting in a few thousand dollars worth of repairs and home renovations may be the difference between selling your house and it remaining on the market. When you sell the house you’ll be able to pay off this loan quickly.
Start A Business
If you’ve never run a business before you’ll find receiving a business loan is especially difficult, if not impossible. Banks typically only give business loans to those with business experience. So while you may not qualify for a business loan, a personal loan might be enough money to get your feet off the ground.
Sometimes there’s just nothing you can do about a sudden medical expense. You should never put off an essential medical procedure because you don’t have the money (understand the difference between a desired cosmetic procedure and one that is critical to your own health). With this you’re investing in your health, so if necessary, it is okay to take on a personal loan for the betterment of your health.
5 Ways Not To Use A Personal Loan
A personal loan is best used to put towards building equity or your personal finances. From starting a business to paying off high-interest debt, all of these are money saving or making ways to use the loan. The worst ways to use a personal loan will add to your debt.
Here are five of the worst ways to use a personal loan that will end up adding to your overall debt:
- Paying for a vacation
- Going crazy with holiday presents you can’t afford
- Overspending on a wedding
- Buying new clothes
If you’re taking out a personal loan for any of these five it is because you don’t have available credit on your credit card. Each of these five you can do without. Instead of paying for a vacation or buying new clothes, focus on reducing debt and putting money aside for the vacation.
Know What You’re Getting Into With A Personal Loan
These are just a handful of the ways you should and should not use a personal loan. Personal loans can prove beneficial to you and your finances, if you use the loans correctly. However, if you don’t, you may find yourself in more debt than when you started. Whatever you do, make sure to follow these tips and suggestions for how to use and how to not use your personal loan.