Taking out a loan can be used for just about anything. In some cases, lenders may ask you what you plan to do with the money. Other lenders will only want to be sure that you can repay the amount. While a personal loan is inexpensive, it can act as a viable option in different circumstances.

Whatever your excuse is for borrowing a loan, if you don’t have a proper plan for paying it back, you can land yourself in more trouble. Late payments or, even worse, a defaulted loan can put you in bad standing with credit bureaus. Before you start scheming what you will do with the extra money, it’s vital to understand how the loan works. Here are some scenarios when taking out a loan is convenient.

1. Repaying Other High-Interest Debts

This is also known as debt consolidation. Sometimes, a personal loan may be more expensive than some other types of loans. However, it isn’t necessarily the most costly. For instance, if you have a payday loan, it’s likely to carry a far higher interest rate than a banking institution’s loan. This is why we recommend checking fast cash loans in Singapore if you want to take out a personal loan. Perhaps you have an older personal loan with a high-interest rate. In this case, replacing it with a new loan could save you some money. However, before replacing it, ensure you ask about whether there’s a prepayment penalty on the older loan. Sometimes, these fees can be too substantial.

2. Home Improvement

If you have some home repairs or just renovating, this is an excellent reason to take out a personal loan. If you have a leaking roof, an ant infestation, or utility issues, these reasons may propel you to get a loan. A loan may help cover up-front costs and pay back the expense over time. However, if you’re rebuilding new walls or constructing a new pool, you may have to use more. It would be best to consider whether this is enough reason to take on potentially hundreds of dollars in debt. In this regard, financial experts say that you should avoid borrowing. They advise against taking out a loan that is more than five to ten percent of your monthly budget. Additionally, ensure you have a payback plan for repaying your loan.

3. Relocating Costs

You will not need to take out a loan if you’re relocating to a short distance. However, if you’re moving over a long distance, expenses can be high enough to warrant applying for a loan. You can use the funds to help you move your household items from one place to another. Additionally, these funds can help you purchase new items for your new residence and meet the transport expenses if you’re moving across the country. Before applying for a personal loan, you should consider whether your primary income will manage to repay the balance. The takeaway is that if you cannot afford all the costs associated with a long-distance move, a personal loan will come in handy.

4. Medical Bills and Medical Emergencies

No one can predict when an illness is due to occur. Medical emergencies and bills are another reason you may go to a lender to seek a loan. Some common medical conditions that may require an immediate personal loan include cosmetic surgery, dental work, skin ultherapy, and other treatment procedures that can cost more than $6,000 or even more. Additionally, medical expenses like prescription medication, medical travel, and consultation sessions can also be efficiently financed by a personal loan. Since personal loans can be released almost immediately, they’re an excellent way to cover a medical emergency.

5. Financing a Big Life Event

Compared with a significant purchase, you can also use a personal loan to finance a significant milestone anniversary party or even a wedding. Taking out a personal loan for such events could be less expensive than using a credit card. As crucial as these events are, you should also think about scaling down somehow if it means going into debt in a few years to come.

6. A Funeral

Nobody would want to consider using a loan for a funeral unless it’s necessary. However, a personal loan can be resourceful after the death of a loved one. One of the best-case scenarios is if they’ve left behind a huge hospital bill. Additionally, funerals are not cheap. Between the burial process, casket, morgue home services, and other factors, expenses can quickly shoot up to hundreds of dollars.

Under the right circumstances, personal loans can be beneficial. However, they aren’t cheap, and sometimes there are better alternatives. Before borrowing a loan, plan carefully and assess whether you can repay it in the long run. Additionally, ensure you consult a financial professional for guidance along the way.