Money Mart: The numerous uses of personal loans

Personal loans may help address a wide variety of financial dilemmas because of their versatility.

Borrowers may use personal installment loans to cover most types of expenses, unlike more restrictive mortgages or auto loans. That means installment loans may provide extra security to cover emergencies and help people reach their financial goals.

This post will cover some popular applications for personal installment loans.

Manage unexpected expenses

At any moment, an emergency could disrupt someone’s life. Scrambling to cover the unexpected expenses that often come with emergencies makes already stressful scenarios even more distressing.

A personal loan could allow someone to borrow the money they need to bridge a financial gap following a crisis. Most lenders allow borrowers to choose a repayment term that suits their financial circumstances. That means, instead of struggling to repay a considerable lump sum right after a challenging situation, individuals could repay it in smaller, more manageable installments over months or even years.

Consolidate debts

Managing multiple lines of credit could become overwhelming as balances increase. For example, someone with multiple high-interest credit cards may quickly find themselves struggling with debt.

A personal loan offers relief in the form of debt consolidation. By taking out one loan to repay all outstanding debts, a person may trade several monthly payments with different interest rates for one bill with a fixed interest rate. Installment loans with relatively low interest rates work best for debt consolidation.

Plan major events

Weddings, vacations, milestone birthdays, and other events often come with intimidating price tags—the average wedding costs around $30,000, for example. Personal loans offer an option for financing important events. While a dedicated savings account should cover most of an event budget, that’s not always enough to pay for every cost.

With careful management and a reasonable repayment timeline, a personal installment loan could bridge gaps in the budget. For example, while a loan may not cover an entire vacation, travelers often borrow money to cover international flights.

Cover home improvement projects

Whether a home needs urgent repairs or it’s just due for an update, renovation projects are often expensive. Even meticulous budgets may fail to account for surprises, like issues with plumbing or wiring.

Installment loans don’t necessarily require collateral, making it possible to borrow money without putting one’s home at risk. Funds are deposited quickly upon approval, so the loan could fit neatly into any renovation timeline. The borrower and lender could also use the renovation timeline to determine the most appropriate repayment term.

The bottom line

Personal loans have the versatility to help people address many financial difficulties and meet a wide range of goals. Plus, their fixed interest rates and repayment term options make it possible to fit them into most budgets.

Borrowing only what’s necessary and making consistent, on-time payments helps make the most of a personal installment loan. With responsible use, they could be valuable financial tools.