With personal loans, you can use the money for almost any expense that the lender allows. There is no “best” reason to finance a personal loan; instead, you may want to consider using a personal loan in any of these scenarios.
1. Debt consolidation
Debt consolidation allows you to combine several debts into one. You can take out a personal loan and use the proceeds to pay off high-interest credit cards, medical bills, or other debts. You will then make a single personal loan payment each month thereafter. Using a personal debt consolidation loan can make debt repayment easier to manage.
🔥 Call tip: You could save money on interest if the APR on your personal loan is lower than the average APR you pay on other debts.
2. Moving expenses
Moving may be necessary if you accept a new job, go to college, or decide to swap your lease for a mortgage. But it is not cheap. According to Moving.com, the average local move costs $1,250and a long-distance move costs an average of $4,890.
If the move to the card, you can use a personal loan to pay it, so that you do not exhaust your cash reserves. A personal loan can also provide extra funds to cover expenses once you’re settled, such as paying a deposit or renewing your car registration.
3. Medical expenses
If you don’t have health insurance (and 28 million people in the US do not, according to the Census Bureau), even a minor medical emergency can leave you with a hefty bill. Personal loans can be used to pay for a variety of medical expenses if you are uninsured or underinsured, including:
- Visiting an emergency room or urgent care
- Orthodontic services and dental surgery
- Eye surgery
- Cosmetic procedures
- Weight loss surgery
- Payment for ambulance or air transport
You can also use personal loans to pay for pet medical care. If your dog needs emergency surgery, for example because he swallowed his favorite chew toy, you can use a loan to pay for the vet.
4. Funeral expenses
Losing a loved one is stressful enough, and you don’t need to have the added burden of paying for funeral expenses. According to the National Funeral Directors Association the national average cost of a viewing and burial was $7,848 in 2021. Cremation is slightly cheaper – $6,971.
If your loved one didn’t leave behind a life insurance policy to cover these expenses, a personal loan is one way to pay for them. Many lenders offer funeral loans specifically for this purpose.
5. Wedding expenses
Tying the knot is a big milestone in life and having a solid wedding budget is essential to avoid overspending. According to Zola, Art a typical wedding budget is between $10,000 and $20,000but you can easily spend more if you are planning a big event.
A personal loan can provide you with the funds to pay for your wedding dress, wedding rings, flowers, photographer, catering – everything you need to make your day special and memorable. And you can also use personal loans to fund your honeymoon if you don’t want to dip into your savings.
6. Car repair
A car breakdown can be a headache if you rely on it to get you to work, school or errands. If you don’t have the money to pay for a new transmission or replace worn tires, a personal loan can help close the gap.
You can also consider a personal loan if you are interested in buying a car. This can make sense if you can get better terms on a personal loan than a traditional car loan.
🔥 Call tip: You can also use a personal loan to pay for your car insurance down payment to secure cheaper monthly rates.
7. Home improvement
Home improvements or repairs can add value to your home, and many homeowners turn to home equity to pay for them. The only problem with a home equity loan or home equity line of credit (HELOC) is that you use the house as collateral. If you don’t pay, you risk losing your home to foreclosure.
An unsecured personal loan will not put your home at risk. Depending on how much equity you have in your home and your credit score, you may even be able to borrow more with a personal loan and get a better interest rate.
8. Extraordinary expenses
An emergency fund designed to store money for unplanned or unforeseen expenses. For example, if you’ve been laid off from your job or your child is sick and you need to take time off to care for them, you can use your emergency fund to cover your day-to-day living expenses.
However, this assumes that you have a substantial emergency fund. According to the Federal Reserve, 36% of Americans would not be able to finance the $400 cash emergency. If you’re still in the process of building up emergency savings, a personal loan can make it easier to manage unexpected expenses.
9. Commercial expenses
Starting a business can help you become financially independent and avoid the 9 to 5. You can turn to a personal loan if you don’t have the money to cover business expenses or to cover living expenses until your business starts to grow.
While there are startup loans, many lenders require that you have at least one to two years in business and $50,000 to $100,000 or more in revenue to qualify for a business loan. Getting a personal loan can be easier if you’ve been working for a short time and don’t make a lot of money.
10. Costs of in-corporeal adoption
In vitro fertilization (IVF) and adoption can offer a path to parenthood, but can have financial tolls. According to FertilityIQ, in vitro can easily cost over $20,000 per cycle, and patients can easily pay $40,000 to $60,000 to successfully conceive. Meanwhile, according to American Adoptions, adoption can cost more than $70,000 on average through a private agency.
A personal loan can help you realize your dream of becoming a parent. You can use the loan funds to pay for in vitro procedures or cover adoption costs, including attorneys’ fees or travel expenses.
11. Federal and State Taxes
If you’ve filed your tax return but owe money, you’ll need to pay by the filing deadline to avoid penalties and interest. At worst, unpaid taxes can result in a lien on your property or a tax refund. Taking out a personal loan can make sense if you want to pay off all your tax obligations to the IRS or state department of revenue.
12. Divorce costs
Divorce can be just as expensive as marriage, and potentially more so if you’re involved in a contentious dispute with your soon-to-be ex-spouse. Suppose you find yourself in a situation where your attorney advises you not to use joint assets or lines of credit to pay for expenses until the divorce is finalized. In that case, you may want to consider getting a personal loan.