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There are a wide range of reasons to get a personal loan. That’s because they are one of the most versatile financial products, designed to help borrowers with diverse needs.
Personal loans are unsecured, which means you don’t have to put up collateral (such as a home or car) to be eligible. Instead, lenders use factors such as your income, job history and credit to evaluate you.
Having a personal loan on your credit report also helps you build credit, if you make payments on time.
Once approved for a loan, you receive a certain amount of money and repay it according to a set rate and term, such as 6% interest over 5 years.
What surprises many people about personal loans is the wide variety of reasons that you can use them for.
Julie Olian, vice president of public relations and social media for LightStream, says, “You can use a LightStream loan for practically any purpose, as long as you meet qualifying conditions. I’ve even seen borrowers use personal loans to buy a hot air balloon and a purebred German Shepherd!”
Read on for six of the top reasons to get a personal loan:
1. Consolidating debt
If you have debts at a high interest rate, such as credit cards or a car loan, you may save money by consolidating them into one low-rate personal loan. Then you make monthly payments on the new loan until it’s paid off.
Debt consolidation can be a smart way to improve your finances — you reduce the amount of interest paid and can then use your savings to pay off your debt faster.
Plus, it’s more convenient to make just one monthly payment. Saving time and money with a consolidation makes it a top reason to get a personal loan.
2. Paying medical bills
Even if you have great health insurance, it doesn’t always cover 100% of your medical expenses.
For instance, most plans don’t cover dental, vision or fertility treatments. A personal loan can make it possible to afford care or procedures that require an out-of-pocket payment.
3. Making home improvements
Want to start a home improvement project, but don’t want to dip into your savings or take out a home equity loan? You don’t need a home appraisal or a certain amount of equity to qualify for a personal loan.
Making renovations, such as a kitchen upgrade, adding a pool or remodeling a bathroom can add value to your home or accommodate a growing family.
In fact, you may be able to buy an entire home with a personal loan. According to Olian, borrowers have used LightStream loans to purchase tiny houses.
4. Buying a vehicle
Before you start car shopping, compare your personal loan and auto loan options.
That allows you to choose the most affordable way to finance a vehicle without the pressure of a salesperson influencing your decision.
5. Attending college
If you run out of federal student loan aid to pay for college or graduate school, students or parents can use a personal loan to cover education expenses. You can also use personal loan proceeds to pay for private school for younger students.
Personal loans make it easy to improve your job skills and marketability in the workforce when you use them for job training, seminars or certifications.
6. Taking a vacation
In addition to debt and major purchases, you can use a personal loan to enjoy yourself or go on a once-in-a-lifetime adventure.
The cost of vacations and special events — such as a wedding, anniversary trip, or retirement party — can really add up.
So, consider using a personal loan to finance your next special event. Pay if off over a set amount of time, instead of charging it on an expensive credit card.