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Unconventional Ways to Use a Personal Loan
There are lots of times that you need a bit of extra cash. Or perhaps a lot of extra cash. A personal loan can provide cash for the typical things like a new boat or to pay off credit cards, but there are other ways you can use a bit of extra cash with a reasonable APR.
Consider your credit cards. Unless you have a fabulous introductory offer, you are likely paying quite a bit in interest if you’re holding a balance. Every purchase you make – especially a large one – is costing you quite a bit if you don’t turn around and pay it off right away.
But personal loans reduce your costs considerably. They also come with a standard repayment plan that allows you to pay off the balance in a matter of months, unlike a credit card which will encourage you to spend years paying off a single purchase by encouraging a low monthly payment that covers primarily that high APR.
So, what are some clever ways to use a personal loan? Any creative way you can think of!
Start a Business
Been thinking about starting a new business? Maybe now is the time. Getting a business loan can be complicated. It requires far more underwriting and documentation than a personal loan. If you have a business idea that isn’t going to cost much more than a new car to get started, a personal loan might be a quick way to get the new business underway.
Take out a personal loan and you’ll have the funds for the initial capital investments as well as marketing expenses. Since you start payments on a personal loan immediately, don’t take out a loan until you are ready to start making money. Use the proceeds of your new business to pay the loan back, and hopefully by the time you loan is in the clear, you are running a profitable side gig or brand-new business.
For many people, negative equity has become a way of life. Negative equity is the “upside down” portion of your new car or new boat or camper. You buy a new car for $30,000. You drive off the lot. The car is now worth only $20,000, but you have $30,000 in payments. You have acquired $10,000 in negative equity.
If you trade in that new car within a few years, you will still be “upside down” at least a bit, and that negative equity will follow you from one purchase to the next, accumulating over time. Negative equity becomes a problem when you want to make more money selling a car outright to a new buyer rather than trading it in.
You must pay off the portion of the loan the private buyer’s payment won’t. A personal loan will cover that gap and let you free yourself from excessive car payments and inflated values moving forward.
Want to be rid of negative equity moving forward? Simply buy a used car, boat, or RV and pay it off as quickly as possible.
Green Energy Improvements
Seems strange to think about, but via tax breaks, the government will refund part of the money you spend making green improvements to your home. Solar panels, for example, are expensive to set-up, but will offer you a tax refund down the road. You may not be reimbursed for the full cost of your new energy efficient windows or solar paneled roof, but you will get something of a break.
The tax breaks (and potentially substantial savings on your electric bill) from energy savings happen over time, and in the future. You still need to be able to pay for your improvements immediately. In a case like this, a personal loan can be viewed as a means to invest in both the environment and your own home. You pay off the panels yourself with your energy savings. The government chips in with rebates. You wind up paying off a personal loan in very little time.
Time Off to Explore
For many of us, travel for a long stretch of time is a dream. Others don’t want to travel – they just want to write their book or move to a new place. But those dreams often go on hold because we have bills to pay. An apartment or home to keep up. Car payments to make. But what if you didn’t? What if the only thing you needed to pay for were campgrounds and cheap motels or a tiny home in a far less expensive area?
If you have dreamed of taking off a year or six months or even a summer to travel in a carefree way or to explore a totally different way of life, a personal loan can fund that adventure. Granted, you will be paying interest on the loan, of course, and the payments start immediately, but with a decent APR, you will be paying far less for the personal loan than you would be for an apartment and fancy car.
RELATED: Refinancing a Personal Loan
Sell the car. Take six months after your apartment lease ends. Keep your own savings in the bank for emergencies and live off a personal loan for a few months, or let the proceeds keep you afloat for a few years while you reinvent yourself. Make the small monthly payments by working on the road or using your savings, and with some careful budgeting, you can have a months-long adventure that creates memories to last a lifetime.