A personal loan is different from other types of loans because lenders do not require collateral. Personal loans are a type of unsecured loan offered to consumers at a higher rate of interest than a loan secured by some type of collateral. Yet, many people choose to apply for a personal loan for things they want or need when they have expenses that they cannot readily pay for out of pocket.
Transportation, lodging, food and entertainment expenses can amount to a considerable amount of money, especially for those who are planning a family vacation. People can use a personal loan to pay for those expenditures up front and then pay the loan off over the course of so many months or years.
A man may have a multitude of loans or credit card accounts that he makes separate payments on each month. If the loans and credit accounts have different interest rates, applying for a personal loan large enough to pay off all of the separate accounts can save money and make things more convenient because instead of multiple payments, he can make one single payment at one interest rate.
When an unexpected repair on your car, boat or home surfaces, you may not have the money readily available to pay for the bills. A personal loan can help you pay for the repair costs and you can pay the loan back later.
Medical or Dental Expenses
Medical and dental procedures can be expensive and take away from your regular budget. Many people will opt for a personal loan instead of causing a potential financial hardship by taking money out of their current budget to pay for the costs.
Perhaps you want to purchase a secondhand vehicle at a price of two or three thousand dollars, or maybe your college-age daughter needs some money for her living expenses. A personal loan can fulfill those purposes and many more.
- Personal Loans: Five Great Reasons to Take Out a Personal Loan
- "Personal Financial Planning"; Lawrence J. Gitman et al.; 2007
- Experian. "What Can a Personal Loan Be Used For?" Accessed Oct. 22, 2020.
- MyCreditUnion.gov. "Personal Loans: Secured vs. Unsecured." Accessed Oct. 22, 2020.
- Consumer Financial Protection Bureau. "What Is a Personal Line of Credit?" Accessed Oct. 22, 2020.
- Consumer Financial Protection Bureau. "How do I pay back my Personal Line of Credit?" Accessed Oct. 22, 2020.
- Metro Credit Union. "Secured vs. Unsecured Loans." Accessed Oct. 22, 2020.
- Marcus by Goldman Sachs. "Personal Loan Calculator." Accessed Oct. 22, 2020.
Based in Texas, Cynthia Measom has been writing various parenting, business and finance and education articles since 2011. Her articles have appeared on websites such as The Bump and Motley Fool. Measom received a Bachelor of Arts in English from the University of Texas at Austin.