5 Reasons Why People Borrow Money
When deciding to borrow money, it can be used for a variety of different things. Including large purchases, alleviate financial hardships or even just supplement an expensive occurrence. These loans are paid back in monthly instalments over typically one to six years. But it can take longer depending on your circumstances and how diligent you are with making payments.
Although it may seem frivolous to take out a personal loan for, well, personal reasons, it can be greatly beneficial in certain instances and when used and paid back correctly.
Here are five reasons to apply and secure a personal loan:
- Consolidate debt
- Finance home remodelling
- Money for moving expenses
- Unplanned emergency expenses
- Making a large purchase
1. Consolidate debt
Debt consolidation is one of the most common rationales given for taking out a personal loan. Imagine carrying multiple loans or outstanding credit cards that all have varying interest rates and balances due. That’s a recipe for financial trouble, and it’s also where personal loans can step in to help.
When you apply for a loan and use it for debt consolidation, you’re combining all of those outstanding balances into one monthly payment. This grouping of debt makes it easier to work out a timeframe to pay off your balances without getting overwhelmed.
One of the best advantages of using a personal loan to pay off your credit cards is the lower interest rates. With lower rates, you can reduce the amount of interest you pay and the amount of time it takes to pay off the debt. Consolidation allows you to pay off credit cards with a clear end date in sight.
2. Finance home remodelling
A personal loan can be a great option to pay for home remodelling. Whether you want to put on a new roof, install solar panels, remodel your kitchen or add a swimming pool, hot tub, landscaping or hardscaping, if you don’t currently have the cash on hand, a personal loan can be a big help when it comes to home improvements.
Furthermore, a personal loan is a good fit for people who don’t have equity in their home. Or don’t want to get a home equity line of credit or HELOC.
3. Money for moving expenses
You probably won’t need to take out a personal loan to relocate over a short distance. However, if you’re facing a long-distance move, perhaps for a new job opportunity, then costs can be expensive enough to warrant applying for a personal loan.
Personal loan funds can help you move your household belongings from one place to another. As well as, purchase new furniture for your new residence, transport your vehicle across the country and any other expenses you may incur.
Before borrowing money to help cover your big move, consider whether your new income will enable you to pay off your loan balance. This consideration will help you avoid the added stress of paying off your loan on top of starting a new career in a new location.
4. Unplanned emergency expenses
Unplanned emergency expenses could include, financing funeral expenses, having a car breakdown or even repaying medical bills.
Some people forget to talk about funeral expenses when discussing the main reasons for personal loans. Though it may be an area that is uncomfortable to consider, personal loans can be a helpful resource in the event of a family member’s death. In short, funerals are expensive. Between the burial plot, casket, funeral home services and other factors, costs can quickly add up to thousands of dollars.
If a deceased person’s estate can’t afford those expenses, a family member or other person may choose to apply for a personal loan to cover the deceased’s final costs.
5. Making a large purchase
Household disasters can strike unexpectedly. If you suddenly need to buy a new washer and dryer but don’t have the funds on hand, a personal loan can provide great relief. Other large purchases, such as an entertainment centre or gaming computers, can also end up costing more than what you have in your checking or savings account. Although it’s nice to have entertainment items in the home, it’s probably best to use personal loans for essential appliances.
Borrowing money allows you to purchase major household appliances and electronics immediately. Rather than having to wait months to save up for them. Though you may incur some loan fees, choosing to borrow money could save you time and money in the long-run, since you’ll be able to avoid using laundromats and other short-term but expensive alternatives.
You could be wanting to buy a car or boat, maybe pay for a wedding or be thinking of taking a dream holiday.
At the end of the day, a personal loan can be used for anything and isn’t limited to the factors listed here.
As seen, there are many different reasons to take out a personal loan. However, remember that no matter the circumstance, it must be paid back eventually. When you take out a personal loan to pay off credit cards or to throw the perfect wedding, your decision to borrow money means that must be repaid-with interest on top. Personal loans are a great way to consolidate debt and make major purchases, but you should always utilise this financial resource responsibly.