10 Reasons Why You Need a Small Personal Loan
There are many reasons to take out a personal loan. Unlike a car loan or a home loan, funds you receive can be earmarked to cover several types of expenses.
Personal loan small amounts may start at a couple of thousand dollars and can range up to a cap of around $50,000. However, most small personal loans tend to fall below $10,000.
Whether your reason to take out a personal loan is to pay a medical bill or contribute towards your upcoming nuptials, you can turn to your local bank or credit union to secure the money you need.
How Is A Personal Loan Of A Small Amount Helpful?
The funds you get for a personal loan can be used for just about anything. This is unlike other loans that have a specific purpose, such as a student loan. This means that a small personal loan allows you the flexibility to cover a variety of expenses.
Also, your credit report’s utilization rate isn’t impacted as much as it would be if you charged the expense on a credit card.
For example, if you have one credit card with a $10,000 limit, and you charge $8,000, your utilization rate will be at 80%, which will significantly reduce your credit score. However, if you get an $8,000 loan, as long as you pay on time, your credit score won’t be severely affected.
Here are 10 reasons to take out a personal loan.
1. Pay Off High-Interest Debt
When you have debt that carries a high-interest rate, you are paying much more than the cost of the items you purchased.
If you can consolidate your debt using a small personal loan that offers a lower interest rate, you can save yourself hundreds or thousands of dollars each year.
Here’s an example:
Credit Card #1
Interest Rate: 23% APR
Monthly Payment: $250
Credit Card #2
Interest Rate: 18% APR
Monthly Payment: $200
Total Monthly Payments: $450
If you consolidate your $9,500 in credit card debt into a $9,500 small personal loan, here’s how your numbers will change.
Interest Rate: 9.49%
Term: 24 months
Total Monthly Payment: $436.14
By consolidating your debt, you will pay $1427.54 less in interest throughout the 24-month loan.
2. Pay Off Medical Bills
You can pay medical bills with a personal loan small amount if you want to avoid going into collections or having the bill show as delinquent on your credit report.
While you might be able to work out payment plans with the medical providers, sometimes it’s easier to pay all of your outstanding medical bills at once.
3. Remodel Your Home
If you want to add value to your home, consider getting a small personal loan to cover the costs of your remodel.
For example, adding hardwood floors (or faux hardwood floors) to your carpeted living spaces can significantly improve the value of your home. So can updating your bathroom fixtures and upgrading your kitchen appliances or cabinets.
4. Pay For A Wedding
According to The Knot’s 2018 National Real Wedding Study, the average wedding costs over $30,000.
Unless you’ve been saving or you have relatives to help, you might consider your upcoming nuptials a reason to take out a personal loan.
5. Pay For Moving Expenses
Depending on how far you’re going and how many items you need to haul, moving can add up to be quite expensive.
To cover the costs of transporting your vehicle, getting a storage unit, hiring movers, etc., you can take out a small personal loan. That way you don’t have to skimp on getting the help you need to ensure your move goes smoothly.
6. Finance Funeral Bills
If you’re paying for or helping to pay for the funeral of a friend or family member, it might be beneficial to take out a personal loan of a small amount to cover some of the costs.
Funerals are continually increasing in price, so you can relieve a bit of the immediate financial stress by paying for funeral bills with a loan.
7. Buy A Car, Boat, RV
You can get a small personal loan to pay for a car, boat, RV, or another motorized vehicle.
This can be especially helpful if you’re purchasing from a dealership or private seller that will only accept a cash offer.
8. Take A Vacation
This is the ultimate example of using your small personal loan for a fun reason. If you want to add a little extravagance to your next vacation, you can take out a loan.
Use a personal loan small amount to fund all of your trip, part of your trip, upfront costs or expenses at your destination such as food and activities.
In this situation, you should consider opting for one of the shortest terms possible. You don’t want to still owe money for a 2019 vacation in 2024 if you opt for a 60-month loan.
9. Improve Or Establish Your Credit
One of the often-overlooked reasons to take out a personal loan is the goal of improving or establishing your credit.
As long as you consistently make your payments on time, you will demonstrate your ability to repay a loan which will improve your credit or begin to establish your credit if you don’t have any.
10. Fund Expenses For A New Business
While it’s better to get a business loan to fund a startup, if you’re a new business owner, it can be quite challenging to secure the financing you need. Getting a personal loan to pay for your new business expenses might be the best option until you establish your business and can bypass personal loans.
Be sure to research the pros and cons of this option and weigh the risks.
Reasons To Take Out A Personal Loan
Whether you want a small personal loan for one of the ten reasons listed above or something different altogether, you can secure the financing you need to achieve the financial goals you have.
At Ohio University Credit Union, we offer personal loans with low-interest rates, flexible payment options, and superior customer service.
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