In 2018, 34 percent of Americans took out a personal loan.
If you’re planning to apply for this loan, it’s clear you aren’t the only one. A personal loan is an ideal credit facility for consumers who don’t wish to state a specific reason for borrowing. You can use the funds however you prefer, as long as you’re capable of servicing the loan.
While you can take out a personal loan for any reason, you’ll be making a financial mistake if you get the loan for reasons that aren’t sound.
To help you make an informed decision, we’re sharing instances when short-term personal loans are a good idea.
Sort Out a Pressing Financial Emergency
Anyone will tell you about the importance of putting some money away for a rainy day. However, this is easier said than done. In an economy where most workers are living paycheck to paycheck, not many people have the ability to contribute to a rainy-day fund.
The good news? You can take out a short-term personal loan to pay for your emergency.
That said, not every emergency requires you to go in for a personal loan. If your car breaks down and you have no money to repair it, you don’t have to take out a personal loan, unless you use the car for income-generating activities.
A medical issue is an example of an emergency that warrants the use of a personal loan. If you fall ill and you don’t have health insurance, don’t hesitate to get a loan. You might need the money in order to be admitted to a hospital or to purchase life-saving medication.
Pay for Utility Bills
If you’re not a homeowner, you must pay your rent on time every month; otherwise, you risk late payment fines or even eviction. And if you’re a homeowner, you’re probably paying off a mortgage.
Regardless of your situation, if you don’t have money to pay your rent or mortgage, it’s advisable to apply for a short-term personal loan. You’ll have money to pay your rent or mortgage, as well as other utility bills such as electricity and water, for a couple of months as you sort out your finances.
Do you have more than one credit card debt?
If yes, you certainly know the hassle of keeping up with balances for multiple cards, each charging a different interest rate. Although there’s nothing wrong with having multiple cards, you are at a higher risk of defaulting if you lose your income for a month.
If you’re already in this situation, you can take out a short-term personal loan as a way to consolidate the debt. You’ll get the money to pay off the entire amount of the credit card debt so that you’ll now have one loan to deal with.
What’s more, credit card debt usually attracts higher interest rates than what’s charged on a traditional personal loan, meaning you’ll likely save money in the long-term.
In addition to consolidating debt, you can get a personal loan to pay off another high-interest debt you might be having, such as a payday loan or car title loan.
Pay for a Short Course or Educational Program
If you’re a degree holder, you’re probably paying off your student loans. As such, you might not be so enthusiastic about taking in any more debt to pursue another course.
However, we’re here to tell you that taking out a short-term personal loan to pay for a short course or program is a good idea, especially if it will improve your career advancement prospects. Who knows, the short course could be what you need to secure that elusive promotion and double your salary.
Even if the short course doesn’t lead to a promotion, you’ll have advanced your knowledge and improved your professional skills.
Carter for Moving Expenses
Every year, over 10% of Americans move or relocate to another neighborhood, city, state or even country. The reasons for moving are varied and not all of them warrant the use of a personal loan to pay for the associated expenses.
If you’re moving for work and your employer doesn’t offer relocation compensation or pays for your expenses after some time, feel free to take out a short-term personal loan to pay for your moving expenses. You can also use these funds if you’re moving to be closer to your family or school.
But if you’re moving for adventure, you might want to think twice before taking out a personal loan to fund the move, especially if you currently have no reliable source of income.
Finance Home Repairs or Remodeling Project
Is your home in urgent need of repairs? Perhaps the roof is leaking or termites have infested the foundation.
When your home needs repairs, it’s important to act immediately. If not, the issue can worsen over time, increasing the amount of money you’ll need to get it fixed. Or the house could become a health and safety hazard. A leaking roof, for instance, can lead to the growth of mold, which can cause respiratory disorders.
It’s a good idea to use a personal loan to finance home repairs.
You can also use these funds for some renovation or remodeling projects. If you’re installing a feature that’ll increase the value of the home, then you’ll have used the money wisely. As your home’s value increases, so does your equity. This means you can secure a home line of credit, even if you’re still paying the mortgage.
Use Short-Term Personal Loans When You’re in Need
If you qualify for a personal loan, the temptation to borrow will always be there. However, you should have a financially sensible reason before borrowing.
We have fleshed out the instances when short-term personal loans are a good idea, but the list isn’t conclusive. Be sure to exercise sound financial judgment before applying for any loan; otherwise, you’ll fall into a debt cycle.
Stay tuned to our blog for more financial tips and insights.