Obtaining a personal loan is a strategy that many individuals take advantage of to increase their fiscal flexibility or to take care of a specific financial obligation. The ability to secure a personal loan is based on your credit history and is often done without the need of collateral such as your car or home.
The institution that provides the loan will determine the amount you can borrow and the interest rate they will charge based on your credit score. According to gobankingrates.com, a score of over 700 will get you the best rates, though you can get a loan with a much lower score. You will, however, have to pay a higher interest rate.
Once you have been approved for a personal loan, there are usually no restrictions on how the money can be used. This fact opens the door to some creative and unexpected ways to use your additional capital. For the purposes of this discussion, we will assume that you have been approved and are now at home, planning your dream vacation with your significant other or family.
Let’s take a look at some of the unexpected ways that you might have to use the proceeds of your personal loan.
1. Home Improvement
Sitting in your living room with your laptop open, you and your spouse are finalizing your decision on which hotel to stay at, and when exactly to leave for your vacation. As you are making your pitch for the property closest to the beach you happen to look up and notice some discoloration on your ceiling. Further investigation shows that what you were hoping was just a shadow is, in fact, a wet spot. It seems to be spreading, forcing you to turn off water to the upstairs bathroom.
The problem turns out to be fairly major, and you realize you are going to have to scrap your vacation plans. After considering home improvement loans, you decide that the best course of action is to just use your personal loan to take care of the necessary repairs. Oh well, at least you will not have to worry about getting sunburned.
2. Medical Expenses
Many health plans come with high deductibles or out-of-pocket expenses that need to be addressed by the individual who is insured. As you sit and discuss your vacation plans with your family, you are startled by a loud noise emanating from your backyard. You leap up and move to investigate. Opening the door to your deck, you step out to see what is causing the disturbance. Unfortunately, you don’t see the skateboard that your son left out there, and step directly on it. You are not a skateboarder.
So now you have a busted ankle and an emergency room visit to deal with and that personal loan you had secured for a getaway is being used to patch you up. Definitely an unexpected way to spend the money, but one that cannot be avoided.
3. Automobile Repairs
Here’s a scenario that we all hope we never encounter. You just left the bank after obtaining your personal loan and are feeling great about it. As you approach your home, you are distracted for an instant and end up hitting a parked car, taking out the whole front of your vehicle. Say goodbye to Cancun. You’re going to the body shop.
According to supermoney.com, car repairs are a valid use of your personal loan and one that you may be forced to make. Many vehicles are used for commuting to work, and without it, you will soon be jobless. There really is no alternative in this situation. When the choice is a vacation or getting your car repaired, there is really no room for discussion.
4. School Tuition
Another unexpected use of the funds you procured with your personal loan is to pay school tuition for your children. While you may think that you should have planned for this already, there are situations that can arise that throw your budget out of whack. Here is an example.
Perhaps your daughter has successfully completed her first year at the local community college. She had planned on a two-year business degree to get her career jump-started. But now she comes to you and tells you that she has decided that she wants to be a nurse and needs to attend a school that offers a four-year nursing degree. Though this will cost you a lot more than originally planned, how can you deny your daughter from pursuing such noble goals? Simply put, you cannot. That personal loan comes in handy when making those higher tuition payments.
5. Attorney Fees
Back to your drive home from successfully obtaining your loan. Remember that car you hit? Well, there was someone sitting in it, and now they are claiming to be suffering from whiplash or some other injury. You suspect that they are not being completely truthful about their injury, but you are forced to defend yourself as they attempt to sue you for damages and lost work income.
Signing over your personal loan to a respected attorney was not the way you wanted this story to end, but it looks like that is what is going to happen. Hopefully, the loan was big enough to cover your car repairs and attorney fees combined.
6. Starting a Business
Here is a more uplifting scenario where diverting your personal loan from its originally intended purpose can be a welcome choice. After you had obtained your loan and begun plans to use it for a family vacation, you get a call from a former business associate. You have long wanted to run your own business, and your colleague offers you a chance to become a part owner of your favorite local craft beer brewery.
After some quick discussion with the family you are off to enter the world of business ownership. Realizing your dream of owning a business makes it a little easier to say goodbye to the dream vacation you had originally planned.
As you can see, there are many reasons you may not end up using a personal loan for its original purpose. Be glad that you had obtained the financing before being confronted with any of these situations.
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