The 5 Best Reasons to Get a Personal Loan

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

best reasons to get a personal loan
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Like any financial matter, there are a lot of pros and cons when it comes to taking out personal loans. It could put you at risk of falling deeper into debt, but it could also be a valuable lifeline and help build your credit.

While you should avoid borrowing money to pay for a vacation or a wedding, there are are some situations where it’s a good idea. These are the best reasons to get a personal loan.

1. Consolidating and paying off your debt

consolidating your debt

If you’re trying to reduce how much you owe, one of the best ways to do that is by consolidating your debt. That’s when you take out a new loan to pay back multiple loans.

You typically do this when you can secure a lower interest rate, reducing the total amount you have to pay. For example, the national average credit card APR reached 16.38% in January 2018, according to CreditCards.com.

Meanwhile, personal loan interest rates can start at less than 5.00%. That equals huge savings in monthly payments.

It can also help if you want one monthly payment since having multiple payments to many loan providers can be overwhelming. Remember to research many personal loan lenders to ensure you’re getting the best rate.

2. Making home improvements

making home improvements

You should really only take out a loan when it helps reduce your debt or is an investment in something that will be worth more in the end. An example is making improvements to your home.

By using a personal loan to update a kitchen or bathroom, you’re increasing the value of your home. When you go to sell it, you could make more on the sale than you owe on the loan.

Also, if you use the money to swap in new energy-efficient appliances, you could save money on your monthly electric bill.

Research other loan possibilities if this is your reason for borrowing money because a home equity loan or line of credit could be a better option.

3. Improving your credit score

improving your credit score

A personal loan could help improve your credit score in a few ways:

  • Since you’d take out a loan at a lower interest rate than the debt you previously had, your debt would decrease faster.

  • If you have a lot of credit card debt and this loan is being used to pay back those bills, your account will show a mix of credit.

  • Having a personal loan increases the total amount of credit you have available to you, so you’d lower your credit utilization ratio. That ratio is a calculation of how much credit you’re using versus your credit limit. The lower the ratio, the better.

Improving your credit score is often a byproduct of another reason you’re taking out a loan, but it’s still an important factor to consider. Be confident you’re making the right decision because not paying back the loan on time could damage your credit score.

4. Investing in career advancement courses

investing in career advancement courses

Like investing in home improvements, investing in your education to advance your career is one of the best reasons to get a personal loan.

Although you can’t use a personal loan to pay for traditional college tuition (you can choose from private student loans for that), you could use it to pay for professional development courses.

The hope is these classes would help you secure a higher-paying job or teach you a new skill to start a side hustle. Before taking out a loan, check to see if you can save up for the class or work out a payment plan directly so that you don’t have to incur interest.

5. Starting a business

starting a business

Whether you have some new skills from that professional development course or have a great business idea you want to pursue, a personal loan is a good way to get that side business up and running.

The money you make from your new venture should first go toward paying back the loan. But, hopefully, the initial boost should put you on track to make much more than you borrowed.

You should also know there are small business loans, so that’s another option you should look into before settling on a personal loan.

Best reasons to get a personal loan

Not having money to cover your debts or pursue your dreams can be frustrating. But that’s exactly why personal loans exist. They can be used to cover many big expenses, such as home improvements or education classes, that will lead to financial success in the long run.

Some of the best reasons to get a personal loan are that they can be used to consolidate current high-interest debt, something that would also lead to a healthy financial portfolio.

Just be sure you don’t fall into the trap of using a personal loan for a bad reason such as a wedding or vacation. After you borrow the money, you want to come out on top, not in more debt.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.28% – 14.87%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.