Top 5 ways to use a personal loan

Are you still suffering a financial hangover from 2015? Did you spend a bit more than you earned and were forced to fall back on borrowing on cards or from the bank just to make sure that you were able to continue to pay all of your bills? Maybe you lost your job or became ill meaning that your ability to earn was reduced?

Perhaps none of these apply to you and you actually had a great year in 2015 and are experiencing more of the same this year. So you may be planning to celebrate something by taking the holiday you have always dreamed of. Maybe you want to do something around the house with some renovations or a bit of a makeover? Perhaps you need a new car to replace your old one.

These scenarios probably describe virtually everybody in Britain and they encapsulate why personal loans continue to be one of the most popular forms of borrowing. Low interest rates and a thriving online personal loan market mean that no matter what your circumstances, there is likely to be somebody with a loan that will suit your needs.

If you want to borrow some money this year, then a personal loan may make more sense than using a credit card or extending your overdraft with the bank. Personal loans allow borrowers to plan their finances for months, even years, in advance, with fixed monthly repayments giving the borrower the confidence of knowing when the loan will be fully repaid. They also come with lower interest rates than borrowing on cards – with the exception of introductory 0% periods – and are generally cheaper than bank overdrafts.

But what are the top five ways that people use personal loans?

Debt consolidation

With a personal loan used for debt consolidation loan, the borrower moves all or a large chunk of his or her borrowing onto the one loan. He or she can then decide whether to close the other credit cards and loans that have just been paid off.

With a personal loan for debt consolidation, rather than making separate payments to all of your lenders, you just have to make one to the loan provider. People who go down this route are able to plan ahead because they only have one interest rate and one fixed repayment to worry about.

Personal loans are unsecured so the lender won’t be able to try to take possession of your house, also known as a foreclosure if you fail to keep up with the repayment schedule. It can, however, still chase you through the courts if you don’t stick to your side of the bargain.

Home improvements

If your home is looking a bit drab, it may not be just your mood that is suffering. Making some changes to the look and layout of a house can raise its value and make it easier when you come to sell it.

Personal loans are a popular way of funding home improvements and, depending on budget, they could be used to pay for a small extension or loft conversion to improve the floor space in the house. Central heating upgrades, double-glazing and new kitchens are also very popular ways of upgrading homes and, again, these can often be financed with a single personal loan.

New cars

A personal loan – arranged through your bank, building society or one of the multitude of online lenders – is likely to be the cheapest way of borrowing the money needed to finance a new car if you plan to pay for it over the long term and don’t anticipate wanting to change it within four or five years.

Unlike other forms of car finance, the borrower owns the car throughout so even if he or she got into difficulty, selling the car to pay off debts would always be possible. This is not the case with other forms of car finance like personal contract purchase (PCP) or personal contract hire (PCH).

Holiday

Holidays are expensive – particularly long haul ones where the cost of the air fares can often exceed the cost of your stay in a hotel or villa once you reach your destination. Add in all the extras like food, drink, excursions and car hire and you could be looking at spending several thousand pounds just to have a couple of weeks away.

It could take you years to save up that sort of money so little wonder then that personal loans are a very popular way of financing special holidays. Thanks to the web, it’s now possible to research, choose and reserve your place on the holiday of a lifetime and, within minutes, arrange for the finance, have the money in the bank and then pay for the entire holiday in one go.

Weddings

About 250,000 people will get married in Britain this year – enjoying the happiest day of their lives surrounded by friends and family. But getting married does not come cheap with the average cost of a British wedding hitting £22,000 last year.

That sum does not include the honeymoon, the rings or some of the sundries. Amazingly, the average venue will cost close to £7,000 while the average bridal dress will be somewhere in the region of £1,500. So it’s little wonder that few people can afford a wedding without a little help.

Personal loans can help couples pay for some or all of the cost of getting married and allow them to repay the cost over a set period with a fixed monthly payment.

Article provided by Mike James, an independent content writer working together with Technology-led finance broker Solution Loans – who were consulted over the information in this post.

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