by Chelsea Springli 
Last winter, my husband and I had a situation that drained our emergency fund, and that still wasn’t enough money. With poor credit card management and little home equity, we felt stuck. Our solution was a Personal Loan.
No two people are in the same financial situation. What works for one person, may not work for you. It’s important to research your options (or meet with a financial advisor). Opening a Personal Loan is a commitment, just like any other loan. Here are some tips and advice to help you decide if it’s right for you.
What are the Benefits of a Personal Loan?
Personal Loans are easy and flexible. It’s a specific amount of money that you borrow, for a set term, at a fixed rate. You know your payment amount and how many payments need to be made. And you can use it for nearly anything. With a Personal Loan, you don’t need any type of collateral, so getting approved is a quick process. Alltru Personal Loans are available with low rates, but they are subject to change based on market fluctuations.
What are Personal Loans used for?
Personal Loans are more common than you may think. According to Experian, around 38% of Americans have a Personal Loan. Here are the top three reasons people open Personal Loans.
Debt Consolidation
The average U.S. household carries $105,000 of debt. Most of those households have multiple forms of debt such as a credit card, Auto Loan, student loan, or another type. Instead of making monthly payments for each form of debt, you can take out one Personal Loan to pay off the other debts. By consolidating multiple loans into one loan, you only have to make one payment each month, making keeping track of payments much more manageable. This works best when the Personal Loan has a low interest rate.
Dream Vacations
We’re not just talking about a weekend road trip. We’re talking about once-in-a-lifetime getaways. Dream vacations are expensive, and if you put that cost on your credit card, it could drown you in debt growing in interest. Instead, you can take out a Personal Loan, see the world, and then make affordable monthly payments at a much lower interest rate.
Medical Expenses
Medical bills (ongoing or unexpected) are typically expensive. While many employers and financial institutions offer Health Savings Account, you still may not have enough money to cover upfront costs. If you can’t comfortably pay for it right away, a Personal Loan may be your best option.
While those are the top three reasons, Personal Loans are also popular for moving expenses, weddings, large purchases, and more.
What are Personal Loan Alternatives?
The most common alternative to a Personal Loan is a credit card. Credit cards are great for small purchases and earning rewards points, but they have to be used wisely. If you can’t pay off your balance right away, it’s risky. Why? Because the average credit card rate is extremely high. When you get buried in that kind of debt, it’s hard to get out. If you have a large purchase coming soon or debt that can be consolidated, a Personal Loan is a better option than a credit card.
As a homeowner who has built some equity, you can borrow a Home Equity Loan or Home Equity Line of Credit. Using your home as collateral, many are able to get a lower interest rate than from a Personal Loan. The approval process will take a little longer than with a Personal Loan. Depending on how fast you need the funds, this may not be the best option. Keep in mind that if you open a loan against your home equity, missing your payments puts your home at risk.
So, is a Personal Loan Right for You?
If you need to borrow money, a Personal Loan could likely help you. It can be used for nearly anything. It has a low, fixed rate, and it’s a more affordable alternative to a credit card. Before you apply for any kind of loan, use a loan calculator to determine the approximate amount of your monthly payments. Try this with the Personal Loan, credit card, and Home Equity Loan interest rates to see the difference in your ability to afford the loans.
If you’re still not sure whether a loan is the right option for you, we encourage you to reach out to us. Our team is ready to look at your financial situation and recommend the best option for you!
