Personal loans are a form of installment credit that can be used for a variety of purposes, such as financing a large purchase, covering an emergency expense, and consolidating debt. Banks, credit unions, and online lenders can offer secured and unsecured personal loans to qualified borrowers. The money you borrow must be repaid over time, usually with interest. Most lenders will look at your creditworthiness and other factors to determine your interest rate.
You should always evaluate the purpose of a loan to determine if you need to take out a loan and if you have the ability to make payments. Common uses for personal loans include financing a large purchase, covering an emergency expense, and consolidating debt. Personal loans are usually unsecured and repaid in monthly installments with interest. The average interest rate on personal loans is around 9.34%, while the average interest rate on credit cards is around 16.6%.
A personal loan can be used to cover medical, dental or other health care costs, such as an emergency procedure, cosmetic work, expensive out-of-network charges, or a high deductible. Important veterinary bills could be in your future, and a personal loan can help you pay them when you're in trouble. You may also use a personal loan to pay for home renovations or plan a dream wedding. Unfortunately, many Americans can't afford to save for emergencies, and you may need a personal loan to help cover a car repair, medical bill, or daily expenses if you suddenly lose your job.
A low-interest personal loan (also known as a relocation loan) can help defray some of the out-of-pocket costs associated with moving. Compare personal loans to other financing options to find the one that best fits your plans and budget. If you have a lot of credit card debt, you could use a personal loan to pay what you owe. Instead of keeping track of payments on debts that could be due at different times of the month, it might make sense to consolidate them into a personal loan with just one payment per month. Even so, it is often more financially responsible to use a personal loan to finance a vacation than to use a credit card with a higher interest rate. As far as possible, plan ahead for these transitions, but if you're struggling and need money to hold it, you may be able to get a personal loan in a matter of days.
If you're lucky enough to have disposable income, challenge yourself to deposit it into a new or existing savings account before borrowing money.