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How to Use Personal Loans to Save Money

Christopher James

2022-02-20

A personal loan is a type of personal financial loan that is used to support a personal, family, or household purpose, such as taking care of personal debts or expenses like medical bills. Personal loans may be offered by banks, credit unions, and other lending institutions. Let's explore personal loans in detail.

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Personal Loans Explained

Each personal loan has its own interest rate and criteria that determine how much you can borrow, and the terms determined by the lender. Lenders determine their own requirements for what reason the funds can be used for. Please keep this in mind when you are applying for a loan. When you visit a site reviewed by Better Penny you can expect to find out what criteria each lender has by visiting their website.

People often use personal loans to consolidate debt or to make home improvements. Personal loans can be a great tool for anyone who wants to simplify their debt and save money each month.

Home Improvements
Personal loans can be taken out to make home improvements such as roofing, insulation, and replacement windows/doors.

Emergency Expenses
Personal loans may be used for emergencies such as an unexpected medical bill or the loss of a job that makes repaying personal debt challenging.

Consolidating Debt
Often people use personal loans to pay off high-interest credit card debt. This type of debt is often expensive and personal loans can be used to consolidate it into one lower interest personal loan.

Wedding Expenses
Personal loans may be used for wedding expenses such as a wedding dress or an engagement ring.

Education Expenses
Personal loans can be used to help pay for college tuition and other education-related fees, but personal loans cannot be taken out by students themselves. A student's parents, someone else who has a cosigner or a creditworthy family friend.

Emergency Medical Procedures
Procedures such as dental or minor invasive surgeries may require the need to get a loan to cover your portion of the bill.

Financing a Vehicle
Auto loans are a common reason for someone to get a personal loan.

Moving Expenses
If you are moving close to where you are not, moving costs are typically not high enough to require much money. However, if you are moving out of state and have a family, moving costs can easily be in the thousands which most people do not have in savings.

Consolidating Debt 

In the right situation, you can save money each month and pay off debt faster with a personal loan. High-interest rate credit like auto loans, credit cards, or student loans can be consolidated into a single payment at a lower interest rate.

Credits cards are typically the most common reason that someone will get a personal loan. The fees and interest rates are on average much higher for credit cards than personal loans, so if you have revolving balances on your cards, you can save money by consolidating your debt.

Benefits of Debt Consolidation

  1. Single Payment Each Month
  2. Lower Payment
  3. Lower Interest Rate
  4. Paid Off Debt on Credit Report 

Conclusion

Personal loans are a great tool for anyone who wants to simplify their debt and save money each month. High interest rate credit like auto loans, credit cards, or student loans can be consolidated into a single payment at a lower interest rate. Credits card are typically the most common reason that someone will get personal loan. The fees and interest rates are generally much higher for personal loans than personal debts, so if you have revolving balances on your cards, you can save money by consolidating your debt.