Personal loans are powerful. They are utilitarian and ready to finance any venture at whatever stage you are in your life. But that is no excuse to rely on the versatile personal loan for just anything. Deliberate and think hard about things that truly matter and worthy of taking out this kind of loan. We’ll help you decide by listing down the top three ideal uses of a personal loan. Are you ready to find out?
Top 1: Credit Card Debt Consolidation
Personal loans are primarily used for debt consolidation.
Credit cards are so easy to use and can lead you to accumulate debt without even trying. The problem with credit cards is that their interest is variable so when you are barely making the minimum payments every month, the principal plus interest would definitely balloon as the days wear on.
Against the backdrop of higher interest rates and lingering monthly payments, personal loans are used to pay off credit card debts. It is cost-effective this way because personal loans have lower APRs than credit cards.
Their interest rate is also fixed so you can expect to pay the same amount every month until the maturity date. By five years or even less, you have succeeded in paying off debt that could have taken years to get rid of.
Top 2: Education Matters
Education is a long-term investment, something worthy of a personal loan.
Let’s face it. Not everything is covered by student loans. What about those unexpected costs? It would be unwise to dip into your retirement savings for your child or your own education. Personal loans can help you fund these education-related costs.
Needless to say, education can lead to more opportunities, choices. For this worthwhile venture that will advance your child’s or your life in the future, it definitely makes sense to borrow for it.
Top 3: Home Is Where Your Equity Is
It’s always a good idea to invest in your home by making improvements financed by a personal loan.
Home improvements, even if small-scale, may enhance the value of the home and add to its equity. This home equity is important to sell the home at a higher price or refinance to lower your existing mortgage payment. Personal loans can be used to fund such home improvements.
While home equity loans or home equity lines of credit are available for that, the latter are second mortgages and would attach to the property, unlike personal loans.
Remember your home may well represent your biggest asset. You could do so much with your equity if you have it. Why not put money into it for posterity?