In the last ten or fifteen years, a huge number of people have taken out personal loans. Why is this? In this article, we'll talk about the main reasons why people get loans.
Consolidation of debt
This is probably the main reason people get personal loans, and billions of dollars are borrowed to help people get their finances in order. The basic idea is to get one loan and use it to pay off all your other debts. Then you only have to make one payment. This not only makes your financial life easier and simpler to handle, but if you do it right, it should also make it cheaper for you to pay off your debt each month.
New Auto
Even though there are many different kinds of auto financing, from simple car loans to packages that include both a loan and a car, many of these deals end up being quite expensive and are usually best for people with bad credit. For many people, a normal personal loan with a lower interest rate and less restrictions can be a better way to pay for a car. The main benefit is that you can use the loan money to buy a car from any dealer or even from a private seller. This is an option that most dedicated auto finance packages don't give you.
Home Improvements
Because home prices have gone up so much in the last 10 years or so, many people now have a lot of equity in their homes. This means their house is worth a lot more than what they still owe on the mortgage. For some homeowners, it can make sense to take out a loan against some of this equity and use the money to make improvements to their home. This can include extra building work, improvements to bathrooms and kitchens, landscaping, or any other expensive task that will increase the value of a property in the long run.
Trip or Vacation
Also, many people have a lot of equity in their homes, which makes it easy to use some of this money to pay for a once-in-a-lifetime trip, cruise, or other expensive travel. Most of the time, it's not a good idea to use your home as collateral for this kind of loan spending, since you'll be putting your home's future at risk and won't have much to show for it when the trip is over. A personal loan, on the other hand, is a great way to spread the cost of a once-in-a-lifetime trip out over a year or two.
Wedding
Personal loans are also often used to pay for a wedding, whether it's your own or that of a child. Weddings today can cost a lot of money, often well into the four or even five figures, and not many people have that kind of money saved up. A wedding day should be a day to remember forever, so many people think it's a good idea to take out a loan to make the day as perfect as possible. The money will also help pay for a great honeymoon and a few basic household items when the couple moves into their first home.
