In 2018, the use of personal loans by consumers has surged to an astounding $120 billion. There’s a good reason for this.
Unlike traditional loans, from banks, credit unions, and other lenders, personal loans offer quite a bit of freedom. In fact, in most cases, you don’t even have to let the lender know how you plan to use the money.
Learn more about the freedom of personal loans and what makes them so appealing here.
What is a Personal Loan?
Before diving into what you may use the money for, it’s a good idea to learn exactly what a personal loan is.
Personal loans are unsecured loans taken out by individuals from a lender to help pay for some type of personal expense. It’s provided to a person based on several criteria, including employment history, credit history, repayment ability, income, and more.
Unlike car or home loans, personal loans aren’t secured with an asset. You don’t have to put up any property or asset to receive the funds.
Using Your Personal Loan: The Sky’s the Limit
When it comes to spending the money, you have received from a personal loan, there aren’t many restrictions. The most important thing to remember is that you need to know what you want to use the loan for prior to applying.
For example, you may want a loan to make home improvements or purchase a new car. It’s a good idea to only seek financing for larger purchases that you wouldn’t be able to afford otherwise.
When you know what you want to purchase, it means you also know how much you need to borrow. This will help you avoid over-borrowing, which could hurt you financially in the future.
Common Purchases with Personal Loans
Some of the most common things that personal loans are used for include:
- Higher education
- Making home improvements
- Debt consolidation
- Purchasing a vehicle
- Purchasing a new appliance
- Making an AC or heater repair
Personal loans can also help provide the funding you need for a big purchase. It will prevent you from having to save for months or even years. Also, you can use the money right away, and then repay it in easy monthly payments.
Are There Any Restrictions?
When you take out a personal loan, it’s your money. While the loan company will likely not put restrictions on how it can be spent, there are some things you should avoid.
Some of these include:
- Paying for food, rent or utility bills
- Gambling
- To put a deposit on a piece of property
- To give the money to someone else
If you are unable to pay for everyday items (i.e. groceries, rent, etc.) now, there’s a good chance you won’t be able to when the money is gone, either. In the long run, this is just going to make things worse.
Also, gambling is extremely risky, and something you should not use your loan for.
Personal Loans: You Have the Freedom to Spend
As you can see, personal loans are extremely beneficial. They offer a wide array of benefits that other financing options can’t compete with.
If you want to learn more about personal loans, contact us. We can also provide you with more information about debt consolidation loans.