There are lots of different ways to borrow money, including personal loans. If you’re wondering, “What are personal loans used for?” we’ve got you covered. After a quick review of how personal loans work, we’ll walk through 7 of the most common personal loan uses.
How do personal loans work?
With a personal loan, you can borrow a specific amount of money for a certain amount of time, without putting up any collateral to secure the loan. You’ll receive the funds in one lump sum. Since the interest rate is generally fixed, you’ll pay back the loan with regular, even payments.
Loan amounts range from several hundred to more than ten thousand dollars, and repayment periods range from a few months to several years—all depending on the loan program. Personal loans are available from traditional banks and credit unions, and also from online lenders. Lastly, personal loans are also called “installment loans” because of the way you pay them back—in even installments.
What are personal loans used for?
There are a variety of personal loan uses. In fact, many borrowers find the flexibility of personal loans to be a key perk—you have wide discretion over what you do with the funds. Here are 7 of the most common personal loan uses:
- Cover an emergency: A personal loan can be a lifeline when you’re faced with a financial emergency, such as an unexpected hospital bill or urgent car repair. 63% of Americans don’t have enough savings to cover a $500 emergency—and a personal loan can help fill the gap.
- Consolidate other debts: You can use a personal loan to consolidate multiple type of debt, including credit cards, medical bills and other types of loans. Instead of making payments to multiple creditors each month, you’ll make one payment to one entity: the lender for your new personal loan. Debt consolidation can potentially lower your interest rate, reduce your monthly payments and/or shorten the time it takes to pay off your debt.
- Make home improvements: Whether it’s to rebuild after a natural disaster or take on a long-awaited kitchen renovation, a personal loan can help when you want to make home improvements. A personal loan won’t tap into your home’s equity, unlike home equity lines of credit (HELOCs) and standard home equity loans.
- Pay for a wedding: Planning to tie the knot? The average American couple spent more than $30,000 on their celebration in 2016, an all-time high. A personal loan can help you fund the big day—and give you time to pay it back, often over the course of several years.
- Improve your credit score: Most lenders report personal loan payments to one or more major credit bureaus, and establishing a history of on-time payments can help bolster your credit score. (Alternatively, late or missed payments will also be reported and likely damage your score.)
- Cover education expenses: The price of college education can be quite steep. In a recent survey, the College Board reports that a “moderate” college budget is almost $25,000 for one year. A personal loan can help you cover all types of educational expenses (not just college tuition).
You can also use a personal loan to pay legal fees, fund a cross-country move, take your dream vacation, or pay for a medical procedure like laser vision correction or infertility treatments.
At RISE we believe everyone should have access to loans that meet their needs. We help you get the money you need today with quick personal loans. Plus, we help you build a stronger financial tomorrow with free access to your credit score and other smart money tools. Apply for a personal loan with Rise today.