Most Common Types of Loan
When most people think of loans, there are a few main categories of loans that jump to mind.
Most people will think of:
These are three very common types of loans and are good for their respective purpose.
What if you want a loan for something that does not fit into these three categories? When that happens, it’s best to use a personal loan.
Personal loans are great because there are so many things that they can be used for. In fact, as long as you are able to pitch a strong case to your lender, you can use a personal loan for just about anything.
What is a personal loan?
A personal loan is just what it sounds like - a loan that is taken out for personal use! There are a few different ways you can use them to your advantage but before we talk about that, let’s go over the process to get a personal loan.
Go to your preferred lender
It’s probably easiest to start with the lender that you’re most familiar with but you can choose any bank or lending institution.
Negotiate your loan
You’ll go through the standard loan approval process. They will check things like your credit score, debt-to-income ratio, and there will most likely be an interview. In this interview, you will have to explain what you’ll be using the money for and your play for repaying it.
Start achieving your financial goals
Once you get approved, you can start working towards your goals, whatever they may be. You can use a personal loan to pay off debt, finance a large purchase, or cover an emergency expense.
Overall, the process to get a personal loan is very simple. If you have any experience with lenders then you’re most likely already familiar with the process. The biggest thing to remember when applying for a personal loan is to make sure you have good credit before applying. If you have good credit, you’re much more likely to get approved for the loan with a low-interest rate.
How do I use a personal loan?
Personal loans are great because of their flexibility. There are lots of ways that you can use them to your advantage. Some of the most common ways are financing a large purchase, restructuring debt, and covering expenses.
Finance a large purchase
Cover moving expenses
Make necessary home repairs
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We’ve seen and helped thousands of individuals and families on the path to debt relief. At Avondale Funding, we are a family first company that strives to help our clients recover from past financial mistakes, and give them the support and aid to get back on their feet again.
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Let’s take a look at the ways to use a loan in more detail.
Ways to use a personal loan
Pay for an emergency expense
Emergencies happen to everyone and when they do there is usually no time to wait to save the money. Something drastic has happened and you need cash right now to pay for it. When this happens, personal loans can be a lifesaver.
For example, if a section of your house was crushed by a fallen tree, you’ll most likely need to wait a few months for the insurance to settle the payment. In the meantime, you don’t want to be living with a huge hole in your house. In this instance, you could take out a personal loan to pay to fix the house while you want for the insurance to reimburse the cost.
Pay for a large purchase
There are plenty of times that you may need to purchase something big upfront. When this happens, it’s common to not have the cash on hand (or just not want to spend it). A good example of making a large purchase is covering moving expenses or putting on an addition to your house. These things are usually a necessity for your way of living but can be incredibly costly to pay for all at one time.
Instead, use a personal loan to make the payment and then focus on repaying that loan slowly over time.
Pay down your debt
One super popular way to use personal loans is to do something called debt consolidation. This involves taking out a personal loan, using that to repay other sources of debt (like credit card debt), and then just focusing on repaying your personal loan. This is beneficial because you will end up paying less money in interest. It will also be much easier to keep everything organized because you only need to repay one loan (instead of multiple credit cards).
Advantage of Personal Loans
There are plenty of advantages of using a personal loan but the two most common are:
Access to quick cash
Personal loans can be incredibly handy when you need cash fairly quickly. They are a good alternative when there is just not enough time to wait and save money.
Can be used to save you money
As weird as it sounds, taking out a loan can actually save you money. This is true if you use a personal loan to pay down any existing debt that you have. In the process, you’ll reduce the total interest on your debt. This will save you thousands of dollars over the years.
Use Our Comparison Calculator To See How Much You Would Be Saving
Give us a call today!
If anything you’ve read has piqued your interest, don’t hesitate to give us a call! There is obviously no commitment to move forward and our associates are more than happy to chat through your situations. If you’re on the fence, consider the benefits of calling: