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How to Utilize a Small Loan for Your Personal Needs

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Few Americans have enough money on hand to purchase big-ticket items, making it hard for them to pay the full amount upfront. Due to this reason, taking out student loans, car loans, and mortgages has become quite common. Borrowers get the money when they need it and then pay the borrowed amount over an extended period with interest.

Our recommendation: A small loan to get you through the weekend.

The Fastest Growing Debt

Moving on to major purchases such as medical bills, engagement rings, home renovations, anniversary specials ― many Americans prefer personal loans to manage the cost.

Did you know that personal loans come under the category of “Fastest Growing Debt?”

According to an Experian study, America’s personal loan debt was at 12% in 2019, whereas the mortgage debt rate was 71.7%, making it the largest portion comprising of consumer debts. Though the debt ratio of mortgages is higher, Americans took out more personal loans than mortgages, student loans, credit cards and auto loans. Experian also reported recently that in the past 2 years, personal loan debt has fallen to 6%. 

A personal loan is a small loan to get you through the weekend. It’s also referred to as a type of instalment credit, which is more affordable than credit cards as it offers lower interest rates. The average APR of a personal loan is 9.34%, whereas a credit card’s average APR is 16.6%.

Compared to revolving credit, once you pay back the loan, you will no longer have access to it. This is a plus point for people concerned that they might spend more than what they can pay back.

Let’s take a look at a couple of reasons how a small loan can benefit your lifestyle:

Moving Costs

On average, a move costs $1,250. The cost can go as high as $4,890 for long-distance moves. Most people choose to pay for this expense by taking out a personal loan. With the help of a loan, you can also cover additional expenses such as moving insurance to ensure that none of your belongings gets damaged during transport.

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Home Remodeling

One of the most common uses of a personal loan is home remodelling. You can use the money to upgrade your home, make necessary repairs or for renovations. If you don’t have equity in your home, you will benefit a lot from this loan. Moreover, it can be a great way to increase the ROI on the home sale.

Appliance Purchases

Let’s say that your washing machine just broke down. You now have to make weekly trips to the laundry and wash your clothes there. A small loan is useful in such situations. It can allow you to buy major household appliances.

Special Day Expenses

From engagements to weddings and anniversaries, you can use a small loan to finance everything. You can purchase big-ticket items such as a diamond ring or have a fancy dinner in a 5-star restaurant. 

You can use the loan to pay for expenses such as the venue, flowers, cake, photography and a wedding planner. This way, you won’t have to empty your savings account.

Vacation Costs

Last but not least is vacation cost, such as paying for a luxury cruise or honeymoon. Whether you just got married or graduated, you can use a personal loan to finance your dream. However, keep in mind to set aside a small amount of your personal savings so that you can keep up with the weekly or monthly payments when the vacation is over. If you have multiple expenses, pay for the large purchases first and then use the remaining amount for the small ones. 

A Major Life Change

Career changes, divorce, etc., come with financial costs and emotional stress. Planning for such transitions is impossible. So, when in a pinch, a personal loan can hold you over until you get back on your feet. Remember that since a personal loan is secured, you will have to make the monthly payments on time; otherwise, the lenders will seize your collateral.

To manage your personal loan, avoid making ridiculous assumptions about how you will pay back the loan. For example, do not rely on your income alone for the payments. Life happens, which means that you need to set aside a certain amount for emergencies. 

When purchasing big items, make sure to go for affordable products that offer durability, stay within your budget and limit credit card use. It can be challenging to stay within your lifestyle limit when you get a personal loan, but having a budget can help you with this.

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About Chef Lilian

Your favorite recipe author, faithful to every course. Mail me at chef@foodwellsaid.com

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