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GOBankingRates (http://www.gobankingrates.com) > Personal Finance (http://www.gobankingrates.com/personal-!nance/) > Loans (http://www.gobankingrates.com/personal-!nance/loans/) > Personal Loans(http://www.gobankingrates.com/personal-!nance/loans/personal-loans/) > 10 Reasons You Should Get a Personal Loan Before 2016 (http://www.gobankingrates.com/personal-!nance/10-reasons-get-personal-loan-before-2016/)

10 Reasons You Should Get a Personal Loan Before 2016By Chuck Epstein (http://www.gobankingrates.com/author/chucke/) / November 14, 2015

If the Federal Reserve (http://www.gobankingrates.com/personal-!nance/federal-reserve-interest-rates-baby-boomers-millennials/) ends its historically low season of near-zero percent interest rates by the end of the year, many are wonderingwhat e"ect it could have on consumers. One thing you can count on is that any rate increases will be passed along to allforms of lending, which will increase the interest rates being charged to borrowers. The higher the interest rate, the greaterthe monthly payments.

If you’re looking to streamline your debts and reduce your interest rates as you wrap up the year, personal loans can be oneway to go. These loans can be used for any purpose and are categorized as installment loans, which means they’re paid backat regular intervals, often monthly. They’re issued based on your personal credit rating as unsecured debt, and can carryinterest rates that are typically higher than secured loans for home or car purchases, but often lower than many credit cards.However, they can make sense depending on your circumstances.

If you’re hoping to take advantage of historically low interest rates, this might be your last chance. Here are 10 reasons why itmight make sense to take out a personal loan before 2016.

Related: 10 Ways Federal Reserve Interest Rates A!ect You Every Day (http://www.gobankingrates.com/banking/us-federal-reserve-interest-rates/)

1. Pay O" Higher-Interest DebtIt can make sense to borrow at a low interest rate to pay o" higher-interest debt, such as credit card debt. In 2014, creditcard debt per household was $7,154, according to the Nilson Report. If a borrower can get a loan at a rate lower than theircredit card averages, it might make sense to borrow.

PJ Walsh of Walsh Financial Planning (http://www.walshfp.com/) suggested tackling debts with the highest interest rate !rst.“I am not a believer in the supposed psychological bene!t in paying o" smaller debts, even if they are of lower interest ratesto make you feel better; always pay o" the debt that is costing you the most,” he said.

2. Prioritize Your HealthNothing is as valuable as your health, so if you need essential treatments and don’t have the money, you might want toconsider using a personal loan to get that essential work done. First, it never pays to delay medical treatment. Second, ratesare likely not going to stay at these historic low levels in 2016, so this could be the best time to get a personal loan. The

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bottom line: It is better to borrow than delay treatment for medical or dental issues.

3. Home Improvements Can Hit the JackpotHome improvements are typically a good investment, especially when it comes to kitchen and bath remodeling. So if you’vedecided you’d like to make improvements to your home, the next question is how to fund your project. The “how” dependson your situation.

Borrowers might wonder whether a home equity line of credit (http://www.gobankingrates.com/mortgage-rates/home-equity-line-credit-heloc-trap/) (HELOC) is preferable to a personal loan. Some of the bene!ts of a personal loan are that themoney is issued all at once at a !xed rate, while HELOC payments are made in stages and the prevailing interest rate can#uctuate. HELOCs could be the better option for homeowners who need to draw from funds over time for longer-termprojects. However, homeowners might prefer a personal loan if they have shorter-term projects or if they don’t want toborrow against their home equity.

Related: Every Personal Loan Option for Your Credit Score (http://www.gobankingrates.com/personal-"nance/personal-loan-option-credit-score/)

4. Start a BusinessInvesting in yourself — that’s essentially what starting a new business is about. The reality is that becoming an entrepreneuris a major undertaking that requires capital.

When applying for a personal loan to start a new business, lenders look at your credit history, assets used for collateral andany co-signers that are required. These loans can be secured (based on tangible assets) or unsecured (as a personal loan),according to the Small Business Administration. Secured loans carry a lower interest rate than unsecured loans tocompensate for the higher default risk. However, if you don’t have — or don’t want to o"er up — the collateral, a personalloan can be a good way to kick-start your business.

5. Get a New Set of WheelsBuying a car is always a challenge, but the good news is that rates are low and new cars have improved their mileage andsafety features. While you might typically get an auto loan to buy a car — they tend to carry lower interest rates because thecar is collateral — sometimes a personal loan makes sense, like if you’re buying a car that a lender typically wouldn’t !nance.Bank of America, for example, says it gives a maximum car age of 10 years and a maximum of 125,000 miles for auto loanapproval.

Borrowers can do more loan comparisons online than ever before, and some sites o"ered by banks, credit unions andspecialty car loan sites allow borrowers to complete their applications online. You can do the research ahead of time todetermine which kind of loan will work best for you.

6. Build Your CreditIf you’re looking to build credit, one way to do that is to borrow a small amount of money and then make on-time paymentson it every month. Consistent on-time payments can help your credit score.

“Debt gets a bad reputation, but a reasonable amount of debt can actually be good for your credit health if you manage itcorrectly. If you make each payment on time and don’t use too much of the credit you’ve been granted, you can show lendersthat you’re a reliable borrower who is likely to pay back debts in the future,” according to Jenna Lee of Credit Karma(http://www.creditkarma.com/).

7. Pay O" a MortgageOwning your home is a signi!cant achievement and can be especially attractive for people approaching retirement. Forwhatever reason, you might want to pay o" your mortgage so you own the house outright. If you can borrow the neededpay-o" amount in a low-interest personal loan, it might make sense for you. Of course, for some, continuing to pay themortgage still o"ers a number of tax deductions, so it’s important to weigh your options.

“Given the recent housing recession, current market volatility and low investment return environment, many homeownerswho are within a few years of retirement have a tough choice to make when it comes to paying o" their mortgage,”according to Len Strazewski (http://www.colum.edu/academics/media-arts/journalism/faculty.html), a !nancial journalist andassociate journalism professor at Columbia College, Chicago. “This becomes a personal preference decision because payingo" a mortgage is a major !nancial milestone, but so is retirement. So if you don’t want to take the risk of market volatility,you can go with the more certain investment and pay o" the mortgage.”

8. Consolidate Debts Before You RetireIt pays to get your !nancial house in order before you retire, and consolidating your debts using a lower interest ratepersonal loan might help ease your debt burden. According to the Association of Independent Consumer Credit CounselingAgencies, there has been a 27 percent increase over the past two years in the number of retirees seeking credit counseling.

“Senior consumers with high-interest debt might seriously consider borrowing from another source in order to pay o" thedebt, if they are able to secure the !nancing at a lower rate,” said Kevin Weeks, president of the Financial CounselingAssociation of America (http://www.fcaa.org/). “A reduced interest rate will not only save money, it will also save the timerequired to pay o" the debt. It could be very important for someone approaching retirement to pay that debt while they arestill working and not on a !xed income.”

9. A Capital Idea for Your Business

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If you are a small business owner, now might be the time to get a personal loan to expand or make repairs for two reasons:historically low interest rates combined with a favorable tax treatment if the upgrades meet the IRS’ quali!cations asdeductible expenses. This can include improvements that are made to a building and its structural components, such asheating and ventilation, plumbing, electrical, !re protection, security systems, escalators and elevators.

The way capital improvements are treated from an accounting perspective gets complicated, so you might want to talk to atax professional !rst. However, if done correctly, small business owners can bene!t greatly.

10. Borrow to InvestThis might be one of the more controversial uses for a personal loan (http://www.gobankingrates.com/personal-!nance/9-tricky-money-problems-can-solve-personal-loan/), but some advisors say it can make sense to use a loan to fund investments.Since every loan has to be repaid, this is risky if an investment goes south and the borrower loses more than they owe.

This is considered an accepted practice in major brokerage !rms since the borrowed amount is secured by an existingportfolio. But beware: Losses can quickly become signi!cant if the market moves against the borrower, according to ColinRitchie (http://colinsritchie.com/2015/02/18/borrowing-from-peter-to-invest-in-paul-does-borrowing-against-your-home-to-invest-make-sense/), a !nancial planner and attorney. Do your homework, and proceed with caution.

Related: Why Personal Loans Are Making a Comeback (http://www.gobankingrates.com/personal-"nance/personal-loans-making-comeback/)

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