Personal loans are typically unsecured, fixed-rate installment loans. “Fixed-rate” means the interest rate doesn't change (as long as you make required, on-time payments), and “unsecured” means you don’t need collateral (like a house or car) to get a loan.
You can use a personal loan to pay for almost anything. In general, however, they’re good for one-time expenses that require quick funding.
Here are some situations when a personal loan can make sense.
Debt consolidation
Personal loans are a popular method of debt consolidation. You can apply for a personal loan and use the funds to pay off outstanding loans or credit cards. This allows you to roll multiple monthly debt payments into one and, depending on the interest rate and term, save money.
Using a personal loan for debt consolidation can make sense if, compared to your existing debts, you can save money on interest over the life of the loan. Consolidating debt with a personal loan can also get you a longer repayment term and lower monthly payments and help get your monthly debt payments under control. Be aware, though, that you may end up paying more in interest if you opt for a longer term
Emergency costs
Emergencies happen, and they can come with big costs. Whether you’re dealing with unexpected medical expenses, car repairs, emergency home repairs or vet bills, a personal loan can provide quick, convenient funding so you can get the services you need.
Wedding costs
Weddings are expensive. A personal loan can provide you with a lump sum to pay all your vendors at once. You can use a personal loan to cover different types of costs, so it doesn’t matter if you’re using the money to pay for flowers, a gown, the venue or all the above. You can even use funds to pay for the honeymoon.
Moving expenses
Personal loans can sometimes make sense for moving costs. For example, what if you receive a job offer and have to relocate within a certain timeframe? You may need funds to cover freight shipping, movers, truck rental or supplies. A personal loan can allow you to borrow what you need for this one-time cost and pay it back over time.
Home improvements
You can use a personal loan for home upgrades and improvements like a bathroom remodel or fixing a leaky roof. A personal loan makes sense if you need funds sooner for an emergency repair or if you don’t want to tap into your home’s equity with a home equity loan.
There are pros and cons to both home equity loans and personal loans for home improvements, and the right loan will depend on your circumstances. If you’re deciding between the two, take time to figure out which is most appropriate for the situation.
Other big expenses
Personal loans can make the most sense for large, one-time expenses – things that come up once and require immediate financing that you’ll be able to repay over time. You might use a personal loan for a big, unanticipated tax bill, replacing a boiler or a plumbing emergency.
Reasons to consider personal loan alternatives
Personal loans can be great tools in the above circumstances and more, but they’re not right for every situation.
While a personal loan can be right for big, one-time expenses that you need quick funding for, like a wedding or unexpected home repair, it might not be a viable option for ongoing expenses like rent. For smaller expenses that you can pay back within the month, you may want to consider using a credit card. For larger expenses, if you have a longer timeframe to obtain funding, you might consider a home equity loan for certain expenses.
When you take out a loan, it’s important to know you’ll be able to consistently make on-time payments. If you don’t think you can pay back a personal loan, you may want to consider alternatives.
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
