What can loans be used for?

Personal loans – often referred to as a quick fix for all sorts of problems, or the solution to debt. But what is all the fuss really about? What are personal loans? More importantly, can they really be used for all those things?

A loan is defined as money that is lent to a borrower from a lender at a cost normally in the form of interest. The loan is repaid to a lender over a set period and used by the borrower to achieve a certain outcome. Some loans are intended for a specific purpose such as home loans, car loans or student loans and can be structured in a way for the borrower to achieve the intended outcome. However, there are also loans that do not have a specific purpose which is otherwise known as personal loans.

Great! A dictionary definition that means nothing. In this blog post, we’re going to go through and explore the different uses of a personal loan. You may be surprised to learn about the multitude of different ways a personal loan could be put to good use. But first of let’s talk about…

Home Loans

Otherwise known as mortgages, home loans are loans specifically used for the purchase of a property, such as a house or unit. Usually, the way home loans work is you save a deposit (the higher the better) and the rest of the value of the property is lent to you from a bank or other lender. To get a home loan you must apply to a lender to see if your loan application will get approved.

There are various types of home loans, which may be more suitable to certain individuals depending on their situation. However, all mortgages will be composed of the principal amount, as well as the Interest and any fees your lender charges.

Variable rate

This type of home loan means that the interest you pay will vary depending on the fluctuations in the market. This means that your repayments will go up and down over the course of your home loan.

Fixed rate

Different to variable rate home loans, fixed rate homes loans mean that the rate of interest you pay remains the same. It can protect you when the interest rate rises, but it also means that you may have to pay more than you need when the interest rate is very low. Nevertheless, this type of home loan is useful for helping to manage your budget.

Split rate

A split rate home loan is a combination of both variable rate and fixed rate home loan. For instance, a lender may let you fix part of your home loan for the beginning of your home loan. While the remaining portion may be set at a variable rate.

Auto Loans

The name auto loan is derived from the title automobile, otherwise known as car loans. As can be deduced, these loans are created specifically for when somebody want to borrow or buy a car. Cars can be very expensive purchases, and it’s uncommon to have a lump sum of money ready to pay for a car out right. That’s where auto loans can come in handy. Whether it’s to buy a new or a used car, an auto loan can allow you to have a car and pay it off while you use it. If you use your car as a necessary part of your employment, it could even be considered an investment.

Student Loans

Student loans are most commonly used to pay for the tuition or fees. In Australia, the fees are subsidized by the government. However, if you do need a student loan they can be used to pay for things other than tuition such as Textbooks, computer, notebooks and other course specific materials. It can also help to pay for transportation and if you have young children, even child care costs for while you go to uni.

Business Loans

These loans are specifically designed for businesses to either help fund some of the start-up costs or if the business needs to make a purchase of a certain piece of equipment. Some business may use business loans to pay for the salaries of their employees when they are just starting out. Other businesses may use the business loans to help pay for office supplies.

Personal Loans

Personal loans are loans that can be used for a variety of different purposes. There really is no limit as to what you can use them for. The only suggestion is to not get a personal loan to pay for keeping up with everyday expenses. Personal loans can generally come in a few various shapes and forms.

Secured

Secured personal loans refer to loans that require an asset such as a vehicle or property to be tied to a loan. The security serves as protection for the lender if you are unable to make the loan repayments. It means that lenders have the right to repossess the asset in the even that you default on the loan.

Secured personal loans are usually found when you need to borrow more than $2,000.

Unsecured

These types of loans don’t require a security to be tied to the loan. Since there is no security tied to the loan, lenders usually charge higher fees for these types of loans to compensate for the risk they are taking by lending to you.

Consolidate debt

One of the great uses for a personal loan is to consolidate debts. For instance, if you have multiple credit cards debts that you need to pay off, getting a personal loan could allow you to pay of these balances. Instead you would just have to work on paying of the loan, whose interest rates will be less than the credit card fees you’re being charged.

Replace household equipment

Another great use of a personal loan is to use it to replace a broken piece of household equipment. For instance, if your white goods like fridges or washing machines suddenly stops working this is something you are going to really going to need. A personal loan can allow you to purchase this item and have it up and running in your house again so that you can get on with the other important things in life again.

Renovate your home

Personal loans can also be used to do home renovations. If your kitchen or bathroom needs some upgrading a personal loan can help you finance it. Whether it’s to pay for the materials or for the cost of the labourers, a personal loan could help you to pay for some or all the renovation costs. This could even be an investment, especially if you plan to sell the property, as the renovations are likely to increase its value. Alternatively, if you plan to rent it out to tenants or put it on Airbnb you can charge more the increased value you have invested into it.

Invest in energy efficient appliances

Another way personal loans can be used is to invest in energy efficient appliances. This can also be viewed an investment as it will help you to cut down on the amount you spend on your energy bills. Some examples of these investment would include:

• Installing solar panels
• Getting energy efficient air conditioning
• Replacing your lights with energy efficient bulbs
• Installing a rainwater tank
• Replace old hot water system to more efficient one
• Pay for your wedding

Another great use of personal loans is that they can help you to pay for all or part of your wedding. Making your special day as perfect as it can be. Personal loans can help pay for the wedding itself or even the honeymoon. It can be used to pay for the whole wedding or part of it. The choice is up to you.

Repay loans from family or friends

Personal loans can also be used to repay money that has been borrowed from family and friends. If the people you care about have helped you out in hard times you may want to pay them back as soon as you can to avoid feeling like you owe them. That way a personal loan allows you to pay back the people you owe, thus relieving you from all that stress.

Car expenses

Cars can be expensive purchases. Though the maintenance of them can be quite costly too. Some of the things that personal loans can help to pay for when it comes to your car are things like paying for a car service. On the other hand, personal loans can also help with paying for a car repair to get your car back on the road again. Alternatively, they can be used to help pay for the cost of your car rego or even your car insurance.

Travel expenses

Another way that personal loans can be useful is that they can help you to cover for travel expenses. This can be great when you need make the final payments to pay for a trip you’ve been planning for a while. They may also be useful for when you want to secure a price at a certain flight. It allows you to have your trip organised while you pay it off later.

School fees

As a parent you’ll know that school fees and childcare costs can be expensive payments. Especially when there is a due date for the fees and they need to be paid for ASAP. Personal loans allow you to pay for the fees when needed while allowing you to pay off the loan gradually.

Medical bills

If you’ve received an expensive medical bill because you aren’t privately insured you may find it hard to gather the necessary funds together to pay for the bill. Especially if there was a medical emergency that occurred out of the blue. A personal loan could be a saving grace in this situation.

Dental bills

Dental bills may also help in an emergency like a medical bill. Perhaps you are getting terrible pain from your wisdom teeth coming through and need to remove them ASAP. Or maybe you would just like to have a cosmetic dental procedure. Personal loans can you help you out in either of these situations.

Funeral expenses

As terrible as these situations can be the costs still need to be covered, and if money hasn’t been set aside for this sort of situation, it can be difficult to know where to turn to get the funds to pay for it. Nevertheless, personal loans can be something to turn to pay for the funeral costs.

Moving expenses

Finally, another great use of personal loans is they can help with paying for any of the costs associated with moving. This could be anything from the rental bond, transportation costs involved in moving as well as even paying for new furniture.

Home loan deposit

You could even get a loan to help pay for the deposit you need to put down on your home loan. Though you cannot have more than $10,000 in debt. So, if you only borrow a small amount, this could also go towards paying for your deposit for buying a house.

Conclusion

As you can see Loans can be used for a variety different purposes. It ultimately just depends on what you need the loan for. You could either get a loan for a specific purpose such as a car loan, home loan or student loan, or you could get a personal loan. With personal loans, you have the freedom to use them on what you want. So, if a personal loan sounds like the right thing for you, you can get one here with ‘We Find Loans’ because we find lenders that offer personal loans, that’s what we do. Apply for one right here – scroll on up!