Financing large projects can be daunting if you don’t have a strategy in place. However, personal loans can be a powerful and effective way to get the cash you need at a predictable rate.
Personal loans can range from $500 to $50,000 or more depending on what you need to finance.
Since most personal loans charge interest, using them to increase your home’s value or consolidate high-interest debt are two of the most powerful ways to use them. While you can use the funds for anything, ask yourself if the proceeds are going to improve your life over the long term.
Today we will discuss how personal loans operate and how you can use them effectively to increase your quality of life.
How Do Personal Loans Work?
Personal loans are a type of installment loan where you apply for a specified amount of financing over a fixed term.
One example would be to consolidate a handful of credit cards charging higher interest rates into one monthly payment at a predictable interest rate.
If you have $10,000 worth of credit card debt with an average of 18% interest, your balance can grow quickly and become a pain. You could get a $10,000 personal loan with an interest rate between 9%-10%, which would effectively cut your interest in half, with the added benefit of a set payoff date.
Once you pay off your personal loan balance, the account will close, and you will no longer have to pay it.
Applying for personal loans is a straightforward process once you choose a lender or online marketplace to work with. The application usually requires proof of income, personal information such as your address and desired financing amount.
After you submit your application, the lender will review it and decide to approve it or not. Utilizing an online marketplace can be a great way to save time on your personal loan application and increase your chances of getting approved.
When you submit an application through a marketplace, you only need to enter your details once. Then, the marketplace will send your application to a variety of lenders who can choose to work with you as long as you meet their criteria.
Large purchases such as a new zero-turn lawn mower or a new computer for your business can both be powerful boosts to your income potential, but they are expensive. Instead of paying entirely out of pocket for these new tools, you can use a personal loan to finance them.
When you finance large purchases with a personal loan, you get the dual benefit of taking ownership of the item and a predictable monthly payment that will not leave you strapped for cash. Personal loan interest rates are usually lower than an average credit card, and the interest paid is much more predictable.
Home improvement projects increase your home’s value, make your living space more enjoyable, and are a very fulfilling way to invest in your future.
However, most home improvement projects can be pricey and take months to complete, which is why a personal loan can help you pay for your project while maintaining financial stability.
Let’s say you want to remodel your kitchen with new appliances and a gas stove. If you estimate that this will be an $18,000 project, you can apply for a personal loan to pay for your improvements and appliances, all with a manageable monthly payment.
If you want to pay it off quickly, you can choose a shorter loan term with a higher monthly payment, but if you want to have a lower payment and are comfortable paying more interest, a longer term may fit your needs.
As we briefly mentioned above, using a personal loan to consolidate debt can potentially save you thousands of dollars in interest over a few years.
Credit cards, bad credit loans, and other high-interest financing can quickly balloon from a useful source of quick cash to a financial nightmare if you don’t manage your balances.
Personal loans can alleviate stress caused by rapidly increasing interest by consolidating your debts into one monthly payment with a much lower interest rate.
If you are interested in consolidating your loans with one personal loan, take the time to work with lenders and marketplaces that offer direct lender payment. When you get approved for one of these loans, they will pay your other creditors on your behalf, and you can start paying a single monthly payment.
Consumers who utilize personal loans to improve their quality of life enjoy a predictable monthly payment and more affordable interest rates compared to other high-interest lending options.
If you are interested in applying for a personal loan, you can boost your chances of approval by making your credit score is optimal by reading your credit report and implementing simple fixes to get a few extra points. You can also use an online lending marketplace where you have access to many lenders at once.
Hopefully, you can see how powerful personal loans can be if you utilize them to save money on
interest or complete a project to increase your quality of life.
If you want to learn more about personal loans, please check out our other guides and reviews for more information.
* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.