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When most people think of how loans are being used, they usually think of buying a house, a car, or an education. However, these days, consumers are using loans to pay for all kinds of things, including debt consolidation. While a personal loan is not always the most economical choice when it comes to interest rates, you can close relatively quickly, it’s usually easy to get, and it can cover just about any expense.
Because personal loans can range in amounts from a mere $1,000 up to $50,000 or more, consumers are using them for many non-traditional uses. Let’s explore loans are being used today.
The Vacation of Your Dreams
It used to be that if you wanted to take the trip of a lifetime you had to save your money, sometimes for quite a long time, so you could have the funds to do it. Some consumers are now taking out personal loans to fund expensive trips so they can enjoy it now instead of later.
While paying interest on a vacation doesn’t sound like a good idea, taking a personal loan is better than using a credit card. Usually, the interest rate will be lower on a personal loan, and there’s a set payback schedule to factor into your budget. Some services actually specialize in financing vacations and don’t charge interest but an upfront fee instead. At least with a fee, you know ahead of time exactly what it’s going to cost you to borrow the money.
While financing a vacation may seem like a frivolous thing to do, studies show that those who take the time to step away from busy lives and stressful jobs are healthier and more productive because of it. Therefore, it may just be worth it to pay a little extra to be able to take that two-week vacation if it means creating a higher quality of life for yourself and your family.
Unexpected Medical Bills
Sometimes, life throws you unexpected expenses that you just don’t have the money to fund. These expenses can come in the form of large medical bills if you have an unanticipated injury or illness. This is especially true if you’re unfortunate enough not to have health insurance.
However, even if you do have insurance, deductibles, co-pays, and prescriptions can all add up to a large amount of out-of-pocket expenses. In addition, these expenses can accumulate in a very short amount of time. If you do find yourself in the position of having to borrow money to pay for medical expenses, make sure you wait long enough for all of the bills to trickle in. Hospitals and other health providers are notorious for sending bills sometimes months after the event, catching many consumers flat-footed and unable to pay them.
If you’re taking a loan to pay these bills, always ask for a cash discount from your health providers, especially hospitals. You can get up to a 30% discount by paying the entire amount in one payment. If you just can’t swing a one-time payment in full, ask for a payment plan.
Funeral Expenses
One thing that people usually don’t think to save money for is funeral expenses for themselves or a loved one. Many times, the death is completely unexpected or follows a long illness that accumulates a pile of medical bills. In either case, paying out the thousands of dollars it costs to bury a loved one is often difficult.
As a word to the wise, make no mistake about it, funeral homes are in the business of making money. Unfortunately, they depend upon their clients being in an emotional state and not being shrewd when it comes to costs. While it may be a very difficult time, it’s important to avoid falling victim to the pressure to overspend on a funeral. It’ll be all too easy to hand it over to the funeral director, but it’ll cost you dearly to do so.
If you feel incapable of being discerning when it comes to the many decisions and choices presented to you, have a family friend or relative help you stay grounded and make smart decisions about funeral costs. Otherwise, you could be looking at a $10,000 bill and might have to take a loan to pay it.
Home Remodeling
If you’re looking to do a home improvement, taking a personal loan to do it may make sense. While there are likely some cheaper interest rate options such as taking out a home equity line of credit or doing a home refinance, you may incur closing costs to secure those types of loans. Additionally, if you do roll the cost of your home improvement into your mortgage loan, you have now secured the funding for your project with your most precious asset.
Using a personal loan instead of a mortgage loan can get you the money you need to complete your project without using your home as collateral. Personal loans generally don’t have closing costs so the net costs may be similar, even if you’re paying a higher rate. In addition, chances are strong that you’ll have a shorter loan term with a personal loan, so you may pay less interest over the life of the loan. Finally, if you need the money fast, you can usually get a personal loan much quicker than you can get a mortgage loan.
Self-paid Wedding
More and more people are waiting until later in life to get married. This means that more couples are paying for their weddings on their own rather than relying on their parents to foot the bill. Weddings can be enormously expensive, especially if the guest list is large, so funding it out of savings can sometimes be a stretch. More and more couples are taking out personal loans as a means to pay for their wedding without having to deplete their savings account.
If you’re going to take out a loan to finance your wedding, don’t use it as a means to overspend. You can put on a very nice wedding by paying attention to details and using a few tips to keep the cost down.
The point here is that there are many ways to plan a beautiful and meaningful wedding without going into deep debt to do it. It also doesn’t make sense to start your life together by accumulating a huge amount of debt. After all, a wedding is over in a few hours, while a large loan can take years to pay off!
Moving Expenses
If you’re facing a move, especially if you’re going a long distance, you could be looking at spending thousands of dollars. Many times, consumers just don’t have the funds saved to cover the cost of moving trucks and other expenses, even if you’re doing the heavy lifting yourself.
More and more people are taking out personal loans to cover moving expenses. While this may seem like an unwise choice, there are definitely circumstances where it makes sense. If you’re relocating to take a higher paying job, for instance, paying some interest on borrowed money could be the right move if you have no other way to fund it. If you’re moving to be closer to family or to help a sick friend or relative, it may just be the right thing to do. Paying a little bit of interest may be insignificant if it means allowing you to spend quality time with family.
Child Adoptions
Adopting a child can be a long and expensive process, often costing more than anticipated. Again, these costs are often difficult to fund out of your personal savings account or your regular cash flow.
If you want to adopt a child, taking a personal loan to do it could make sense. Since the cost is most likely going to spread out over a long period, you can put the money in a savings account until you need it. This will allow you to earn interest that could offset the interest you’re already paying. Since adoptions can sometimes take years, you can work to pay off the loan as you go through the process.
Adopting a child, especially if you’re providing a home for a disadvantaged child, is a noble cause, and borrowing a bit of money to do it can be the right move. This is especially true if this is the only way you can afford to finalize the adoption.
Big-ticket Items
Some people are using personal loans, rather than secured loans, to buy big-ticket items such as cars, RVs, and other large items. This can be for a number of reasons, such as being unable to qualify for traditional financing or wanting the asset to be unencumbered.
You’ll likely pay more interest by financing your item this way; however, if you need the item, such as a car to go to work, and that’s the only way you can do it, then it might make sense.
One interesting way that personal loans are in use is to finance the build of a tiny house. Many people, especially young people starting out or folks who are retiring, don’t want a mortgage, so they’ll borrow the needed funds to build a tiny home through a personal loan instead. This means that the final product will be unencumbered and the owner will have the ability to pay it off over a much shorter period. This can be an excellent use of funds from a personal loan if it means having a paid-off home and not incurring the monthly expense of rent or a mortgage. With the mobility offered by a tiny home on wheels, owners are free to go where opportunities take them and not have to pay expensive moving and relocation expenses.
Whatever your needs are, it may make sense to consider a personal loan to cover your non-traditional expenses. While not always the right choice, personal loans can often fill a need that traditional loans just don’t. Always know your numbers though, to make sure that taking a personal loan is the right choice for you.
