Personal loans are known to be one of the most versatile loan types in the UK. The funds obtained from a personal loan can be used for numerous personal expenses and financial obligations, whether you are planning for the future, consolidating past debts, or putting the money towards a once-in-a-lifetime event.
There are also many different types of personal loans available to apply for in the UK, including payday loans, instalment loans, and even loans for specific amounts, such as £200 loans and or £2,500 loans.
There are also personal loans for bad credit which are designed to help people that need to find a personal loan in the UK but who may have bad credit or even very bad credit. For those with very bad credit in particular, getting a personal loan can be very tough and so, dedicated products can provide the loan they need.
What Can I Use a Personal Loan For?
There are many different options available to borrowers when it comes to how to use a personal loan. Typically, a personal loan, particularly in the case of unsecured personal loans, will be used when the borrower finds themselves in a spot of trouble and when their regular income from employment does not cover what they need to spend from one month to the next.
They are referred to as ‘personal loans’ as they are typically used for personal purposes and those that are most relevant to a borrower’s day to day or personal needs, as opposed to business purposes.
Here are some of the top reasons why people choose to use a personal loan in the UK:
Personal Loans For Debt Consolidation
If you have a number of different debts with multiple lenders, payment dates, and interest rates, it can be difficult to manage payments and pay off your debt. What often happens to people with numerous debts and financial commitments is that one or two may be missed, adding interest and charges. This can ultimately lead to a spiral of debt.
Being able to manage your finances and prioritise your debts is crucial to avoiding added debt. As a result, consolidating debt can be a very wise financial practice to undertake.
Taking out a personal loan to consolidate old debts means streamlining your debt into one monthly payment and managing one, usually lower, interest rate.
Paying Off Student Debt
It is possible to repay a student loan using a personal loan. However, you will typically find that your student loan interest rates are lower than those of personal loans and will already be comfortably factored into your payslip and regular salary once you earn above a certain amount.
This means that it often does not make sense to pay off student debt with a personal loan, as you will end up paying more. Additionally, personal loans may offer less flexible repayment options.
However, a personal loan can be used to pay for other education-related expenses. These may include books and materials or room and board.
Just as in the case of any other short-term and personal loan, always look at the alternatives to borrowing money before committing to do so.
Paying Private Medical Bills
Mounting medical bills can be an expensive debt to overcome. Although the National Health Service (NHS) in the UK is free, growing waiting lists mean that more people are looking toward private and self-funded healthcare options.
This means that medical bills in the UK are increasing, and, for some, this can be a struggle to repay if you don’t have private medical insurance.
Using a personal loan could help you manage your debt. Although, missed payments can incur expensive fees. Therefore, it may be worth trying to speak to your healthcare provider first in order to negotiate the price for services or come up with a more flexible repayment plan.
For example, you may be able to pay in instalments at no additional cost. This would negate the need to take out a loan and pay expensive interest rates. However, if you have explored all other avenues, a personal loan could help you manage your medical bills.
Emergency Home Repairs and Maintenance
Borrowing money to carry out necessary home repairs, such as a damaged roof or broken window, can be a sensible idea and good use of a personal loan. Before opting for this, check if your homeowner’s insurance would cover the costs.
However, think about whether you actually need these repairs. For example, if you have termite damage, it is necessary to invest in the repairs. Something such as a renovation or aesthetic change, however, would not be a good use of a personal loan.
Tax Debt or Collection Agency Debts
If you owe money in any shape or form and are being followed up by collectors, using a personal loan to pay off your debts can prove to be a logical solution. It can stop collectors from chasing you, and you can start to positively build your credit rating.
For instance, if you owe money to utility providers as a result of not being able to save money on your household bills , you should always start by speaking to the provider who may be able to help you set up a payment plan.
Similarly, if you owe tax debt to HMRC, not only can it be expensive, but it can also be scary and anxiety-inducing. Weigh up the interest rate and fees of a personal loan versus the interest and penalties you would accrue as part of an instalment agreement you may discuss with HMRC in order to assess the best option for paying what you owe.
Paying For a Wedding
Weddings can work out to be very expensive, and it is not uncommon for wedding costs to spiral a little bit out of control.
If you have no savings to put towards a wedding, a personal loan can seem like a good idea to cover your costs. Although interest rates of a personal loan can be lower than a credit card, it could also encourage overspending. This means that you would start your married life with a negative balance.
Funding a Holiday
It is possible to use a personal loan to pay for a holiday.
However, this does not necessarily mean that you should. While it is possible to use a personal loan for pretty much anything you want, it might be more prudent to use your salary or savings to pay for the trip. On top of that, you can also use a credit card for any purchases and pay the balance in full. This means that you can get rewards for spending if your credit card company offers perks.
