Five Great Reasons to Take Out a Personal Loan

Any time you borrow money, whether from a bank, a friend or family member, or a credit card, in effect you are borrowing from your future. You will have to pay the money back, in most cases with interest, so you should be sure you’re taking out the loan for the right reasons. You should never borrow money to buy things you can’t afford, and always make sure you can keep up with the payments you’re agreeing to when taking out personal loans.

1. Debt consolidation – Personal loans can help you consolidate high interest credit card debt into a lower interest, fixed rate loans with manageable monthly payments that can help you get out of credit card debt faster.
2. Buying a car – Interest rates for auto loans are usually lower than those for personal loans, so if you can get a car loan to buy the car of your dreams, go for it. Most banks won’t offer auto loans on older cars with lower resale value, however, since the collateral isn’t worth much. In that case, a personal loan is the way to go.
3. Car repairs – If you have an accident, auto insurance often doesn’t cover all the repairs. You can take out a personal loan to get your ride back on the street fast.
4. Medical expenses – When you have a serious illness or injury that requires hospitalization or emergency medical aid, the bills often come in faster than you can keep up. Always verify what portion insurance will pay first, but if you don’t have enough in savings to pay the rest, you can often use personal loans to pay your balance. Not only will it keep bill collectors off your back, but it will help your credit score.
5. Family vacations – While you don’t want to mortgage your future on frivolous trips, taking a family vacation can often bring families together and must be timed when school is out. If you’re careful, you can use personal loans to take that trip with your family. The memories will last a lifetime, and the loan can be paid off in a matter of months.

Personal loans are one of the few forms of unsecured credit available to consumers. Since there’s no collateral, interest rates will be higher than for secured loans, such as mortgages and auto loans. Personal loans also come with fixed repayment terms, including interest rates and loan length. To get the best terms on personal loans, be sure to comparison shop.