Whether you’re forking out to cover the costs of emergency medical care or want to put a down payment on a house, a fixed-term personal loan can be a life-changing financial source.
Not only are personal loans the fastest-growing loans out there, but they can also help you to improve your credit score and save money all at the same time.
However, taking out a personal loan can be a daunting experience, especially if you aren’t familiar with the full extent of what they can do, and the repayment process.
Here’s how a personal loan can help to save you some money.
What Is A Personal Loan?
This is an unsecured loan usually in the range of $1,000 to $100,000 that comes with a fixed interest rate. The word “unsecured” sounds quite frightening but it truly isn’t! It simply means that you do not have to worry about putting up any collateral.
Personal loans are typically intended for individuals who are looking to make larger purchases or consolidate debt.
Depending on your credit score you could potentially qualify for a lower interest rate personal loan to save some money instead of taking out a credit card. If you have bad credit loans in Little Rock AR then you can expect to pay much higher interest.
The interest rate on your personal loan depends entirely on several factors including your monthly cash flow, credit history, and credit score.
Remember: the stronger your credit profile is, the lower the interest rate you can expect.
When Should Personal Loans Be Used?
Unlike mortgages or student loans that are concerned with specific purchases like buying a home, personal loans can be spent entirely at your discretion. This means you have more flexibility to do what you please with the loan.
So if you’re planning on repaying your loan within five years, then a personal loan is a great financial solution.
How A Personal Loan Helps Save You Money
Though it can sometimes be a complicated process to qualify for a personal loan, it can have many financial benefits. We have outlined the most important ways that you can save some money using a personal loan.
It seems too good to be true but yes, taking out a personal loan can improve your credit score over time!
A lender will evaluate the way you utilize your credit card each month. If you have accumulated significant debt and your spending is too high, you may be considered to be at higher risk by a lender.
You can manage your credit card usage with the following tips:
- Speak to your lender about potentially raising your overall credit limit. You might be subjected to a hard credit pull so make sure to double-check with your lender before doing this.
- Make sure to set up automatic balance alerts for your account.
- Make multiple monthly payments throughout the month instead of paying your balance with a single payment at the end of the month.
Credit Card Utilization
You might be able to improve your credit score if you use a personal loan to replace any credit debt that you have left.
This is because personal loans have a fixed repayment term (they are installment loans) whereas credit cards don’t have a fixed repayment term. If you switch the two, you’ll have the power to lower your monthly credit utilization.
Emergency Medical Expenses
Medical emergencies can be extremely stressful situations at the best of times. If you add in the financial worry and burden associated with money struggles, then it can be a truly overwhelming time.
Thankfully, it is possible to apply for a personal loan to cover the costs of any medical emergencies or unexpected medical care that you may not otherwise be able to afford with a credit card.
Personal loans will sometimes be much higher than a credit card which might be exactly what you need for your particular health situation.
Personal loans can be used to consolidate any high-interest credit card debt and also to obtain a lower interest rate so you can pay off all of your debt quicker.
Personal loans can also help to cut your credit card interest rate by around 50%. This is how it works:
- Compare interest rates on your credit card with the personal loan interest rate so you can figure out which one is lower.
- If you have good credit then you will likely be able to obtain a lower interest rate on your credit card than the one you currently have.
- Qualifying for a lower interest rate is a good thing. But you must make sure you can repay the personal loan over the specified loan period. Short-term loan repayment periods will save you interest costs and will also motivate you to pay off your debt quicker.
Emergency Home Repair Or Improvement
Completing home improvement projects or sorting out emergency repairs within your home can often be costly experiences. If you cannot refinance your mortgage or utilize another financial source, then a personal loan may be the most attractive option to save you some money in the long run!
Personal loans are often great for these purposes, especially if your project is adding to the overall value of your home.
Personal loans can also be used to have life experiences. You can qualify for this loan to pay for a wedding, a honeymoon, an engagement ring, or even a dream vacation that you otherwise wouldn’t be able to afford.
The easiest way to decide if a personal loan is necessary is to as yourself whether what you need financial assistance for is a want or a need. After all, you don’t want to take out a loan if you’re not entirely sure of what you want to use it for!
Personal loans are great and highly flexible sources that can be used to ease financial burdens and cover the cost of many different debts and experiences. It comes with the potential to save you more money in terms of large financial repayments than using a credit card.
One thought on “How A Personal Loan Helps Save You Money?”
What a wonderful post, you have put quite a lot of effort into this one, I can tell. Love everything about this, great post. Hope to see more such posts from you soon.