Personal Loan Can Get You Through a Tough Time

[Dec 24, 2009.]

 

Borrowing money to pay bills should never be the first plan of action. But if you suddenly find yourself with financial problems because of a job layoff or other serious situation, a personal loan may help. Here are some situations where a loan could help you through a rough spot--if the money is handled wisely.

1. Use a loan to consolidate credit card debt. Many credit cards have interest rates in the teens and higher. Cardholders who are late with payments generally see the interest increase to the default rate, which makes monthly payments jump significantly. Debt consolidation combines several credit card balances into a lower, fixed-rate loan. This can give borrowers some breathing room in their budget.


2. Personal loans can be used for emergency repairs on a home, or other unexpected expenses. No one plans to have a leaky roof, have their car break down, or experience some other type of emergency. If you have emergency savings, you should use those funds first, but frankly many folks don't have much of a savings.


3. A loan can be used to pay for education expenses. Although many college students and their parents obtain student loans and other financial aid, students may have other expenses that aren't covered by that money.


4. A personal loan can keep a business going. The economy has been tough on many small business owners who have had trouble getting financing to keep their doors open. In some situations a personal loan may be helpful, but it's important to have a solid plan for the money to avoid ending up in worse financial shape.


5. Loans can be used for medical expenses. For many families, a sudden illness is devastating in several ways. Medical expenses can ruin a family's finances. They play a huge role in many bankruptcies. If you are thinking of getting a loan for medical debt, you should first try to work out a payment plan or debt settlement with your medical providers. In some cases, medical debt is reduced or waived.

Personal Loan Spending Plan

Borrowers who use personal loans for unexpected situations must be very careful about how they spend the funds. It can be tempting to use some of the money on treats to cheer up family members or yourself while enduring tough situations. However, money from a loan should not be used to pay for a vacation, shop for clothing, buy a new TV, or other frivolous purchases. Loan money should be budgeted carefully, like any other source of income.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.