What is a personal loan used for today? A complete guide
What is a personal loan used for?Is getting a personal loan a good idea for you? Today, we’re going to answer all these questions. Personal loans are a great modern tool for everything from lump-sum payment to investments.
- What can a personal loan be used for?
- Is getting a personal loan a good idea?
- What you shouldn’t use your personal loans for
- When you should get a personal loan
- You can leverage your digital assets for a personal loan at just 6% APR on MyConstant
Taking out a loan should always be a serious consideration — unless you know you’ll have the money to make future payments, it could have catastrophic consequences. Yet handled correctly, personal loans can be a financially smart decision.
Personal loans aren’t just for emergency rent payments and large purchases like houses, their uses go way beyond that.
What can a personal loan be used for?
If you’ve decided a personal loan makes sense for you, you’ll probably want to check that your plans for how to use it are viable.
Some of their most common uses are
- Home improvements/purchases
- Car purchases
- Expensive vacations
- Medical bills
As you can see, you can use a personal loan for just about anything you might need a large sum of quick cash for.
There are, however, some less conventional uses for personal loans you should also be aware of.
Personal loans for debt consolidation
Many people pay more toward their loans every month than they have to, especially if they have high-interest debts like payday loans or credit cards. A personal loan allows you to pay off your high-interest debt in a lump sum and switch your overhead to lower monthly payments.
Finally, you can also use personal loans to invest. It’s known as a margin account or leverage: investors borrow directly from their broker and use their investment profits to repay them.
Taking on debt for something as volatile as investing is extremely high risk. But for savvy investors, it’s another tool in their belt to greater returns.
Is getting a personal loan a good idea?
While there are many things a personal loan can be used for. It’s also important to point out a few things they should not be used for.
What you shouldn’t use your personal loans for
It’s important to remember that personal loans are only for non-commercial uses. If you need a loan to start or run a business, take out a business loan instead.
It’s theoretically possible to use a personal loan toward your tax debt— but this is rarely a smart decision. The IRS (or the equivalent tax authority in your country) will generally give you a more favorable repayment plan than a personal loan provider can.
The same applies to student loan payments. Federal student loan providers almost always offer lower interest rates than personal loan companies, although there are occasional exceptions for private student loans.
When you should get a personal loan
Personal loans should be a last resort rather than a go-to solution. If you’d like a holiday but don’t have the cash up front, consider making a savings plan a year in advance, starting a side hustle, or even borrowing from family.
However, emergencies happen; if you break your leg and can’t afford your medical bill, a personal loan can be a saving grace.
You also have to consider your circumstances — especially your credit history. The higher your credit score, the lower the interest rate lenders will offer you, making loans more affordable.
Unfortunately, those with poor credit scores have more to lose from taking out loans and can end up in a debt spiral. But don’t despair — there’s a solution.
You can leverage your digital assets for a personal loan at just 6% APR on MyConstant
At MyConstant, we offer Crypto backed loans, letting you unlock the USD value of your crypto without selling up.
We don’t rely on credit scores to decide whether to offer somebody a loan. Instead, we use cryptocurrencies as collateral — as long as you meet the requirements, you can take out a loan without revealing your financial history.
You can use our loans for everyday needs, like paying emergency bills or funding big purchases. They are also ideal tools for crypto traders who want to invest on margin. Instead of dealing with inconvenient exchanges, our loans let you access crypto quickly and with fewer fees involved.
If you repay 75% of the loan before it’s due, you’ll only have to pay 50% of your interest. The more successful your trades, the less you’ll have to pay!
When deciding “should I get a personal loan?” the decision ultimately comes down to you. Personal loans aren’t right for everyone, but they can be great tools if you leverage them smartly.
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