How to Use a Personal Loan in 7 Unexpected Ways
March 21, 2019 | By Ana Elliot
Have you ever thought “Man, I really wish I had the money for this…” before? Money is the elusive resource that holds a lot of power in this world and we are often slaves to how much of it we have. Sometimes though, to generate a better life or invest in ourselves, we need some extra money to get the process started.
And sometimes, it isn’t even the biggest things that would make a big impact. Sometimes, it is as simple as a new dishwasher or taking a nice trip. If you are feeling stifled in your life and need a change but are lacking the upfront cash, why not think about a personal loan?
While most personal loans are used for consolidating debt into a manageable payment, in this article, we are going to ask you to think outside of the box regarding personal loans and what you can use them for!
What are Personal Loans?
In case you don’t know what a personal loan is, let's answer this question: Well, NerdWallet defines them as: “A personal loan is money borrowed from a bank, credit union or online lender that you pay back in fixed monthly payments, typically over two to five years. Lender rates can range from 7% to 36% APR.” Sounds good, right? Personal loans are considered “unsecured” loans meaning, simply, that they are not backed by any collateral on the part of the borrower (that’s you).
You don’t have to put your car or something else up to get a personal loan. Sounds useful, huh? For the most part, as I mentioned above, people take out personal loans as a way to deal with credit card debt. The terms on personal loans are much more forgiving--especially if your credit score has improved--and allow people to consolidate their debt to one payment. But! That is not what we are here for! Today it is about how to use personal loans in ways you hadn’t thought of previously.
Seven Unexpected Ways to Use a Personal Loan
That’s right--we aren’t just going to show you one or two ways to use a personal loan that you hadn’t thought of. We are going for a grand total of six! Yeehaw!
Remember earlier when I mentioned not having the capital to invest in yourself? Sometimes, that investment can come in the form of investing in your dreams! Perhaps your life has turned you in a totally new direction and you’ve been thinking about making the plunge into your dream business! If you are having trouble opening up a line of credit for your new business, you might want to look at a personal loan to get the ball rolling! It could be the boost you need to get your entrepreneurial dreams up and off the ground!
Maybe now that you are considering that business dreams, you are realizing you don’t live in your ideal city? Do you need to move for a new job? Do you need to move to be closer to family? Renting too long? Well, you can use a personal loan to help fund a move or purchasing a new home.
While most personal loans aren’t enough to cover purchasing a home, it could greatly help with the cost of hiring movers or a down payment or closing costs. You are still going to need to get a mortgage but there are so many extra costs! Perhaps a personal loan could help you fly out to look at houses in a new city and pay for moving across the country?
Remodeling Your Home
Moving sound like a lot of work you’d rather not do but you are still feeling bored and stuck in your current home? Has your kitchen needed new counters and cabinets for ages? Are your bathroom tiles cracked? Are you planning on moving when the kids leave in a few years but would really like to increase the value with some updates
Well, investing in your home is never a bad idea! Investing in your own home will repay itself when it comes time to sell! Using a personal loan to help make your home look how you need or do what you want for your future could be a great idea. You can even remodel your home to have green features! Higher efficiency appliances and features can not only bring your monthly bills down but you could be eligible for certain tax benefits!
While a lot of people put the dream vacation they’ve been planning for a while on a credit card, you can also do the same with a personal loan, and, if your credit score is good, you might be eligible for better interest rates on that loan. Traveling can be life-changing, soul-invigorating experiences!
While you might be hesitant to use a lot of money on a trip, if you can find a loan with good terms, now might be the time to make your travel daydreams into a reality! A personal loan is also good if you are worried about losing time from work while you travel. It can help cover your rent and utilities while you are out touring!
Student Loan Debt
Has it been a while since you’ve graduated but you are still struggling with those student loans? While education might have gotten you into the career of your dreams (we hope), paying for it for ages isn’t great. It also is not great when you are paying multiple loans on different repayment plans that all have different due dates.
If the amounts left on student loans allow, why not look into consolidating your student loan debt into one personal loan! This way you can only have one loan to worry about! If you have more questions about student loan debt, check out this article on how to tackle that: (link for the article I wrote also this week on student loan debt for SFL).
Weddings are expensive. Like… $30,000 on average expensive. Yikes. Before you go tabling your plans on marriage altogether, perhaps look into a personal loan. You might be tempted to throw the cost on a bunch of your credit cards but it would be easier to just pay back the one loan with a fixed monthly payment and loan term than dealing with all those card payments.
At this point, you are probably getting the idea. Any big or major purchase in your life that could end up haunting your credit cards or just living in your dreams is a contender for a personal loan. Keep that in mind as you go forth and plan out your financial year!
So, How do I Apply for a Personal Loan?
If any of the above options felt like good ideas, you might be interested in the application process. Well, you can apply for personal loan online directly through the lender but your first stop should be to do some research. Look at the different loans out there and do some research. Which loans are the closest to what you are looking for or fit your needs the best?
Using loan comparison tools like this one from NerdWallet are great ideas to help you narrow down your searches. Once you’ve decided which loans are the best fit, we highly recommend pre-approval first. What is pre-approval? Well, we can tell you!
Pre-approval is when you fill out a less intense application and the lender runs less thorough credit checks to see if you can even get approved. From there, they will give you an offer based on what they have seen so far. While this might sound like a waste of time, it is going to save your credit score. How? Well, you’ll avoid “hard” credit checks. Hard credit checks happen when a lender runs a full credit history when you apply. Each hard check gets recorded and will affect your credit score.
To avoid this, do a pre-approval application which will require less info upfront from you and will only do a partial credit history check or a “soft check” which will not get recorded on your credit report and will not affect your score. Most algorithms are fine-tuned enough that you should get a pretty close approximation of what your actual terms should look like but remember, the pre-approval offer might not be exactly your final one. Either way, if you want to keep your credit clean and apply for personal loans, this is the way to go.
Go Chase Your Dreams!
Long story short, a personal loan is a great tool to fuel your life. Whether that is in the classic sense of consolidating your credit card debt to make managing your debt easier or through taking that perfect vacation, building that reading nook, making that green commitment you’ve promised yourself, or even moving to a seaside city to open your underwater cave themed bar. Whatever your bliss is, wherever it might lead you, don’t let it be trailed by maxed out credit cards screaming for minimum payments every month!