When you submit an application for a personal loan, you will be asked what you’re going to use the money for. This is important, so make sure you give an accurate reason. Personal loans are good for spreading the cost of a purchase over the long term and can be used for a range of expenses. Let’s take a look at four of the reasons why you might consider applying for a personal loan.
The suitability of a personal loan
Just before we provide you with some reasons why a personal loan is a good option, it’s important to mention what such a loan can’t be used for. You cannot borrow money in the form of a personal loan for anything linked to crime, gambling, or paying for unnecessary purchases. Every lender will stipulate what they think is a good reason to take out a loan, but four of the most common reasons include:
Debt consolidation
If you’re hoping to get your finances in order, taking out a loan for debt consolidation is a smart move. Consolidating your debt sees you use a personal loan to pay off various avenues of credit. This might include credit card debt, short term borrowing, or guarantor loans. Debt consolidation personal loans can help you save money on repayments and will make things easier for you as you manage your monthly debts. However, you shouldn’t apply for a debt consolidation loan if you can’t afford the new repayments or if the loan won’t cover all of your debts.
Home improvements
While the best way to fund home improvements is to use your savings, a personal loan is a good alternative. A home improvement loan also allows you to bring work forward and then spread the repayments over an extended period of time. This helps with your cash flow and allows you to keep money on hand for other purposes. Most lenders, like Koyo Loans, offer unsecured personal loans that can be used for home improvement purposes, and they’re a good option to consider.
Emergency expenses
If your car needs emergency repairs or your roof was damaged in a recent storm, you can apply for a personal loan to cover the cost of the repairs. If you don’t have the cash available in your account, a personal loan is a decent alternative. Some people might be able to put emergency expenses on a low or zero interest credit card, but this won’t be possible for other borrowers.
Buying a car
Borrowing money in the form of a personal loan is an effective way of covering the upfront costs of a car purchase. Personal loans are usually cheaper than finance deals offered by car dealers, but it’s best to check the interest rates in advance. Importantly, when you buy a car with a personal loan, you will own the car outright, which isn’t the case with certain car financing plans.
The verdict: When to apply for a personal loan
There are lots of viable reasons why applying for a personal loan is a good idea. The four reasons above illustrate that a personal loan can be used for different purposes, and providing you have a good credit history; you shouldn’t have any issues when it comes to submitting an application.
