What’s the Smartest Way to Use a Personal Loan?

What’s the Smartest Way to Use a Personal Loan?

A personal loan from a reputable lender can be an excellent way to improve your credit, make necessary payments, invest in your future, or pay for a vacation for you and your family. Personal loans offer an alternative to secured loans, such as mortgages or auto loans.

While poor planning or late repayments can negatively impact your finances, a well-managed personal loan from T&I Credit Union can help you afford life necessities like a car or school. It can also help you save money in the long term by paying off high-interest debt.

Discover the smartest ways to use a personal loan from T&I Credit Union to set you up for future financial success.

What are Personal Loans?

A personal loan is money you borrow from a financial institution such as a bank or credit union. Upon approval, you receive the money you borrow in a single, predetermined lump sum that you can use for lender-approved purposes.

To pay back the loan, you pay fixed monthly payments that include added interest per your annual percentage rate (APR) agreed upon when you took out the loan and origination fees. Some personal loans give you greater flexibility in how you spend the money, though these tend to be unsecured and carry high interest rates.

Borrowers with good credit scores, typically 700 or higher, can often get lower interest rates on loans, while borrowers with poorer credit scores may see higher interest rates. As with any money you borrow, a personal loan requires sufficient financial stability and a guarantee of timely repayments to improve your credit history. But if you can make repayments on time, a personal loan is often the best choice for covering necessary expenses and investing in your future.

Best Ways to Use a Personal Loan

Personal loans can be a smart way to finance your education, pay off surprise emergency expenses, or consolidate your pre-existing debt. With shorter payment periods and fixed interest rates, personal lines of credit through a financial partner like T&I Credit Union can even help improve your credit score if you are prompt and reliable in your repayments.

Open Up a Line of Credit

Some of the more common examples of personal loans are credit cards. Lines of credit allow you to take out money to purchase various products and services. You pay off the borrowed amount in future repayments of your credit card bill.

Credit cards can be one of the smartest ways to use a personal loan if you are looking for an effective way to improve a mediocre or poor credit score. Prompt repayments on credit cards help you build a positive history on your credit reports. As long as you can pay your credit card bill on time every month, a line of credit can help you improve your credit score.

T&I Credit Unions offers eligible applicants Visa Classic and Visa Gold credit cards. Depending on your credit history, you may be approved for a T&I Credit Union Visa card with a spending limit of up to $20,000 and an APR of 10.90%.

Consolidate Your Debt Through a Personal Loan

Personal loans can also be a smart way to repay debt through debt consolidation. Taking out a personal loan to pay outstanding debt reduces your debt-to-income ratio and simplifies payments to multiple debtors in one location.

With T&I Credit Union, you can get debt consolidation loans of up to $20,000 for 36-month, 48-month, or 60-month terms. Depending on your credit score, a debt consolidation loan for a 36-month term can come with annual percentage rates as low as 6%. This reduced interest rate helps you pay off debt quicker and reduces the amount you spend on interest per month.

Take Out a Life Loan for Major Events

Personal loans can also be a smart way to pay for important events in your life, such as weddings, honeymoons, or family vacations. Events like weddings are some of the most memorable parts of your life, but they also tend to be expensive. A life loan helps you pay for a wedding ceremony without having to draw too much from your savings accounts.

Through T&I Credit Union, you can get a wedding loan of up to $10,000 for a 24-month term. In addition to weddings, life loans can be a smart way to pay for a honeymoon or vacation you’ve always dreamed of. T&I Credit Union offers holiday loans of up to $2,500 for 12-month terms.

Finance Your Education with a Personal Student Loan

For those looking to further their education, personal loans can also finance college tuition for qualified borrowers. Borrowing money as a student can be an effective way to pay for college or graduate school, affording you the financial peace of mind to focus on your studies. Undergraduates without the necessary credit to qualify for a personal loan can have a parent or guardian cosign for the funds.

T&I Credit Union offers student loans through Student Choice, a partner company that serves students looking to financially secure their studies. Through Student Choice, you can apply for a private education line of credit that will help you cover your undergraduate tuition and other expenses associated with college studies.

Improve Your Credit History with a Share Secured Loan

One of the best ways to use a personal loan is as a shared secured loan. This is especially true if you have money in a savings account but still have a poor credit score that you want to improve.

A share secured loan matches the amount of money in your savings account and uses the account to secure the loan. When you take out a share secured personal loan, you can use the funds from the loan for personal expenses rather than drawing the payments from your savings accounts. This way, you will only make payments against the money you already have while still being able to pay the lender back.

These types of loans are also useful because financial institutions are often more willing to approve borrowers with bad credit. Since the money already exists in the borrower’s savings account, the loan amount is already secured. Paying back a share secured personal loan on time is also a great way to improve your credit score.

Through T&I Credit Union, you can apply for a share secured loan for 60 or 72-month terms. Depending on your credit history, your share secured loan could come with a rate as low as 2.74% for 60-month terms or 3.24% for 72-month terms.

These loans are a smart investment so long as you can match the amount with your savings account. The maximum amount available in a T&I Credit Union share secured loan will vary depending on your current financial savings.

Home Loan Concept, Loan Word On Table With Loan House Model Econ

Take Out a Signature Loan for Surprise Expenses

In addition to all of these other types of personal loans, you might qualify for a signature loan. Signature loans are usually unsecured personal loans with an APR based on factors like your credit score, income, and other financial considerations. Through T&I Credit Union, you might qualify for a signature loan of up to $20,000 for a 36-month term and an APR of as low as 15%.

Signature loans can be a smart way to pay for different life expenses to avoid dipping too much into your savings account. For example, personal signature loans can be a smart way to pay for:

  • Car repairs. Unexpected maintenance issues or damage to your car can happen anytime, and you may not be able to cover the cost of repairs. Depending on the extent of the repair and your financial stability, you can usually take out smaller signature loans with reasonable interest rates.  A personal signature loan for car repairs is distinct from an auto loan. Auto loans serve as financing options for the purchase of new vehicles. On the other hand, personal signature loans are unsecured loans that can be used to pay for necessary repairs to a vehicle you own.
  • Home improvements. Much like your car, your house can often need unexpected repairs that cost more than your savings may allow. A personal signature loan can be a smart way to pay for necessary home repairs in the short term. You may choose between taking out a personal signature loan or a home equity loan. Home equity loans come with lower interest rates and offer longer repayment terms. However, to get approved for a home equity loan, you will need sufficient existing equity in your house as collateral.
  • Medical expenses. Like car and home repair costs, an unexpected medical bill can pop up in your life without warning. A short-term signature loan is a smart way to pay off medical expenses without depleting your savings account.

Personal Loans from T&I Credit Union

Whether you are looking to apply for a credit card, take out student loans, or get a signature loan for home or car repairs, it’s vital that you find the right financial institution as your partner. T&I Credit Union is dedicated to helping people of all financial backgrounds through the joys and challenges of life.

T&I Credit Union offers numerous personal loan options such as credit cards, student loans, share secured loans, life loans, and other types of personal loans for unexpected expenses or debt consolidation. Our website offers a loan calculator you can use to determine whether or not you qualify for a particular loan, what your fixed interest rates will be, and how much money you can save.

Browse our website for more information on the types of loans you may qualify for. If a personal loan is the smartest choice for your financial needs and future, call T&I Credit Union at (248) 588-6688 to get started on your loan application today.

About Peter Connelly

Peter Connelly studied philosophy and literature at Duquesne University and enjoys learning about business trends, pop culture, and education. Peter has worked in the education field, in the nonprofit sector, and as a freelance writer. He enjoys creative writing, travel, and photography in his free time.

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