How Do People Use Personal Loans – Best and Worst Ways!

The Best and Worst Way to Use a Personal Loan

Personal loans are growing rapidly in popularity throughout the United States. Recent reports reveal that in 2018, Americans had $120 billion personal loan debt in the first quarter alone! These figures are staggering, but it is also understandable why more and more people are resorting to these loans. Available through traditional and alternative lenders, personal loans are the quickest solution to short-term cash crunch, emergencies, and any type of financial crisis. Though beneficial in many ways, personal loans can be risky if not used for the right reasons. So when should you borrow a personal loan? Let’s discuss some of the best and worst reasons:

Best reasons to use a personal loan

Personal loans can get you a substantial amount of money that you can use for various purposes. Though you have the liberty to decide how you want to spend the money, experts would advise you to practice caution. Taking out a personal loan for the following reasons makes sense:

Emergencies:

No one can predict the future, and when an unforeseen event leaves you broke or in need of funds, a personal loan can be of significant help. For example, you or a family member may get sick and require immediate medical attention, your car may need repairs and so on. Personal loans are often disbursed quickly, which is why they are perfect in emergency situations.

Home renovations:

Does your home need some immediate repair work? Are you thinking of giving it a makeover? Whatever the case may be, a home renovation project requires a significant sum of money. If you do not want to dip into your savings, the alternative would be to take out a personal loan for home renovations. This way, you can complete the project with ease and repay the loan in fixed monthly installments.

Credit card debt consolidation:

Are you struggling to pay off multiple maxed out credit cards? If so, you must be losing sleep, thinking about how you would get rid of the enormous debt burden. A personal loan can help you consolidate your credit card debt and pay it off at once. This way, you can close all your high-interest credit card accounts and focus on repaying the personal loan only.

Worst reasons to get a personal loan

We have discussed the right reasons to borrow a personal loan. So, it only makes sense that we delve into the wrong reasons as well. Here are some situations where you should not borrow a personal loan.

For your wedding:

Want to splurge on your big day? If so, you should do it with your savings! Never take a personal loan for a wedding. It makes no sense to add to your debt burden for just one event or a party! Have the wedding you have always dreamed of, but within your means.

For taking a vacation:

We all need breaks from our mundane everyday life. However, no matter how badly you need a vacation, you should never take out a personal loan for it. Build a separate savings account where you can put money every month for a future getaway.

As you can see, borrowing a personal loan makes sense as long as you do it for the right reasons. You should never take on a substantial debt burden for frivolous or non-essential expenses.