Personal loans are flexible financial tools you can use to fund various projects, from kitchen renovations to debt consolidation.
Since personal loans are given as a lump-sum payment and come with a fixed interest rate, it’s easy to budget your monthly payments, and you can use them for a variety of purposes. Keep reading to learn how to use a personal loan to help with your 2024 budget.
Handling emergency expenses
If you encounter an unexpected car repair or medical expense and don’t have enough in your emergency fund to cover the cost, a personal loan can help you get by. You can use a personal loan instead of turning to high-interest credit cards and taking on more debt.
Consolidating debt
You can also use a personal loan to consolidate high-interest debt into a single monthly payment. For instance, if you have multiple high-interest credit cards, you can use a personal loan to pay them all off. This can simplify the debt repayment process, increase your available credit, and help you save money if you secure a lower interest rate.
Improving credit
Taking on a personal loan can help improve your credit score. If you only have revolving credit (such as a credit card), adding installment credit (such as a personal loan) can increase your credit mix. Similarly, making your fixed loan payments each month can improve your payment history. Boosting your credit score can help you qualify for more credit products at a lower interest rate, making it cheaper to borrow.
Home repairs or renovations
If you’re planning to redo your kitchen or replace your roof, a personal loan can help you complete the project without disrupting your daily budget. Rather than trying to come up with the cash or turning to more expensive borrowing methods, you can estimate the project cost and borrow the amount you need for upfront expenses.
Large purchases
You can also use a personal loan to finance a large one-time expense, such as purchasing a new fridge or dishwasher. Rather than using a high-interest credit card or in-store financing, you can apply for a personal loan with a fixed monthly payment. This way, you know exactly how much to budget for each month.
Is a personal loan right for you?
Many personal loans come with a fixed interest rate, making it easy to budget for your monthly payment. Plus, personal loans allow you to use your funds in whatever way you choose. If you’re faced with an unexpected expense, a costly renovation, or just want to improve your credit, a personal loan can be a preferable option as opposed to higher-interest financial products.
