What Are The Benefits of Obtaining a Personal Loan?

the words "personal loan" written on paper over a hundred dollar billl

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You might need some extra money to start a business, plan a wedding, go on a dream vacation, or simply consolidate some of your high interest credit card debt. All of these are reasons to consider obtaining a personal loan.

The benefits of obtaining a personal loan include that the money can be used for almost anything, the interest rates can be low, decisions and funding are relatively quick, and collateral is typically not required.

In this article, we’ll discuss the benefits of obtaining a personal loan in more detail.

Let’s jump right in.

What is a Personal Loan?

A personal loan is money borrowed from a bank, credit union, or online lender that you repay in fixed monthly payments. Personal loans are generally paid back between two and seven years.

While it’s generally a good idea to use your own money for spending needs, a personal loan can be used for both discretionary spending as well as things such as consolidating debt.

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What are the Benefits of Obtaining a Personal Loan?

As mentioned above, there are several benefits to obtaining a personal loan. Here are some specific benefits for you to consider.

1. Help Pay For Emergency Expenses

You might have an unexpected expense, such as an emergency room visit that wasn’t covered by insurance or an expensive visit to your auto mechanic. 

A personal loan can help cover these expenses and prevent you from dipping into savings or swiping your credit card. In addition, personal loans generally have considerably less interest than a credit card, so this may be something to consider if your savings can’t cover the expense.

2. Consolidate High Interest Debt

You may have one or more high interest credit cards with balances that you’re struggling to pay down. 

What’s beneficial about a personal loan in this situation is that you can borrow money at a lower interest rate and use it to pay off your credit cards. From there, you’ll have a fixed monthly payment over the term of the loan that may save you a sizeable amount of money from the lower interest rate.

3. Can Be Used to Finance a Vacation

You might want to travel on an exotic vacation and not be able to pay for it upfront. A personal loan can be used to fund the trip, and this may be a better option than using your credit card, as a credit card likely has a much higher interest rate.

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4. Can Help Build Your Credit

You might be able to improve your credit score by taking out a personal loan, as you’ll be building your credit history. Lenders report your payments to one or more of the three major credit bureaus: Equifax, Experian, and Transunion.

Making on-time payments each month shows future creditors that you’re more creditworthy.5.

5. Payments Are Predictable

Personal loans typically are due on the same day each month for the same amount of money. Since the payment is fixed and predictable each month, it’s easier to fit a personal loan payment into your budget.

6. Quick Decision and Funding

With some personal loans, you’ll get a decision on the same day or within a few business days. You may even get same or next-day funding. Applying online often makes the decision and money-disbursement process even quicker.

7. Flexible Use

Personal loans can be used for many things, including:

  • Starting a new business
  • Funding a trip
  • Consolidating debt
  • Paying for medical bills
  • Funding home improvement

Because you can use a personal loan for just about anything, getting one may make sense if you need some money and don’t want to use your existing assets to cover the expense.

Check Your Personal Loan Rate in Minutes

Get a personal loan from Upstart to fund debt consolidation, a new business, home improvements, paying off medical debt, and more.

Check your rate in minutes without affecting your credit score.

Affiliate Disclosure: This is an affiliate link, and we may earn a small commission if you click and make a purchase. This helps our site grow and provide you with more content. Read how we make money here.

8. Collateral is Generally Not Required

Most personal loans are unsecured loans, meaning you won’t have to put up an asset as collateral. What this means is if you fail to repay your loan, you won’t have to worry about an asset being repossessed.

With that in mind, if you don’t pay back a personal loan, your credit score can suffer, and the lender may be able to sue you for the money. Your loan may also go to a collections agency.

9. Relatively Easy to Apply For

Personal loan applications are relatively simple and easy to apply for compared to a mortgage or home equity loan. 

With online lenders, it’s often possible that the entire loan application process can be done in one sitting at your computer or on your mobile device.

Applying For A Personal Loan

Consider your options before taking out a personal loan. While it may be tempting to take on debt, you’ll want to make sure you’re able to repay the loan each month. It might make more sense to save up for your upcoming purchase.

Always read the fine print and consider shopping around for the personal loan that suits you best.

If you’re interested in a personal loan, one company to look into is Upstart. You can get your rate in just a few minutes, and it won’t impact your credit score to check.

Check your Upstart rate today.

Wrapping It Up

There are many benefits to obtaining a personal loan, however, before you take on additional debt, consider your options carefully. While debt can be an instrument to help you in life, too much debt can be problematic and hurt your ability to build wealth.

When looking for a personal loan, shop around and find the loan that works best for you.

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