What kind of things can you get a personal loan for?

Personal Finance · 15 Jul 2020

The range of personal loan options is ever growing.

The range of personal loan options is ever growing. Whether you need $2,000 or $70,000, there are solutions out there for every purpose, from wedding loans and education loans to help with medical expenses and debt consolidation.

Treated carefully, a short-term debt gives you the opportunity to chase or fulfil a dream – often a lot more quickly than you'd be able to do otherwise.

Is all debt bad?

The word 'debt' has an ugly connotation in some settings, but that's not always the case. In fact, debt can be a useful, even important, tool if you want to get ahead in life.

How many people do you know who own a house? How many of them bought that house without a loan? Taking out a mortgage is the most obvious way people get into debt, but the benefits are clear: it's the only way onto the property ladder for everyday Australians, it stops you paying rent to another property owner and it gives you security over your living situation.

Home loans aren't the only way to get ahead by taking on debt. There are plenty of other options available to help give you a foot up or speed up the saving process.

Examples of common loan purposes

So, apart from mortgages, what common reasons do people have for taking out loans? We've found that these are three of the most popular loan types.

Business loans

Starting your own business is a way to create financial freedom for you and your family. Not all business ideas succeed, and it's certainly not an easy road, but with the right skills, attitude and a bit of luck, people find they can often make more money by themselves than working for others.

However, starting a business can be costly. Whether you need to find premises, buy equipment, take out expensive insurances or have enough money to pay staff before things take off, there are a lot of start-up costs. A business loan can be a convenient way to cover these fees.

Business loans aren't just for startups either. You might find that somewhere along the way, you need a bit of extra money to replace something or buy new equipment. With a strong business plan in place, a loan could be handy.

Harmoney business loans are a little different in that they’re actually a personal loan you take out in your name, rather than the business name, to use for business purposes.

Car loans

Home loans and mortgages are common, because we all need somewhere to live. A lot of us also need our own transportation, which is why more people are applying for car loans.

Whether your family needs a second car, you want to upgrade so you have a safer model for the family, or you need a reliable vehicle to get to work, applying for a car loan can help you achieve your goal more quickly.

Home improvement loans

Just because you have your own house, doesn't mean you have the perfect home.

Home renovation loans can give you the capital you need to make the improvements you want. Whether it's an extension to house a growing family, an upgrade for a kitchen or bathroom or a makeover for your back yard, a loan can help you live in a place that you're proud to call home.

What to consider

There are times when taking out a loan or getting into debt is not a good idea. The most obvious is when you can't afford to pay the debt back.

So long as you keep on top of your repayments, you'll be on track to reduce and completely pay off your debt. If you've used the money wisely, you should be in a better position than you were before you applied for the loan.

However, if you fall behind with your repayments, that's when trouble happens. Depending on where you got your loan, you may have to pay late fees, you'll amass more interest and your credit rating may take a hit.

One of the most common ways people get into problems is with credit card debt. Although there may be an inviting introductory offer, after a little while, interest rates can rise to extremely high percentages.

So before you take out a loan, have a serious think about if you can afford it. Think about how much you'll have to pay back each month and how that will affect your cashflow. Try our personal loan calculator for a rough idea of what you might be able to borrow, and what your repayments would be,

Other articles you might like

What are the common benefits of an online personal loan?

What are common reasons for personal loans?

How to build a good credit score from the start

We write these articles for you, our Harmoney borrowers, to be, what we hope, are helpful tools. The information, including rates, is current at the time of posting and is designed to be a general guide only. Any advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.

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