Most of us would prefer not to carry liability or debt. But there can be times when taking out a loan may be unavoidable. An emergency financial requirement can push people to use available credit options. And when this happens, you need to make sure to make the best choice possible and pick the best way and manner to take out a loan. Sometimes, the borrowing could be in the form of a low interest credit card, but for most of life’s immediate financial needs, a personal loans makes more sense. Student loan, car loan, home loan – these are all self-explanatory, but taking out a personal loans is more open ended as opposed to other loans that are designed to cater to very specific needs.
Here is a list of 6 smart ways to use a personal loan –
Save Money: If you qualify to obtain a personal loan at a lower interest rate as opposed to what you are currently paying, then you can end up saving a lot of amount towards interest due. For instance, let’s say if you have INR 100,000 credit card balance at 18% and you avail a personal loan at 14%, you end up saving INR 11,000 in over the term of 5 years. You may even get a personal loan at a lower interest rate depending upon the rating of your credit score.
Pay off Debt: Let’s say you have a two-wheeler, or student loan stuck at a high-interest rate, or you had to finance furniture for your home that you are yet to pay off – how do you get out of such situations? The same principle applies here as well. With smart personal loans, you can move your high-interest debts to lower ones. By paying them off as quickly as possible, you can save up a lot of money.
Improve Your Credit: With personal loans, it is easier for you to pay off your debts. Now that it is easier to pay them off, you have a higher chance of giving an excellent repayment behavior. Furthermore, different kinds of credit in your credit history and your repayment ability will also give your credit score a boost.
Emergency Medical Expenses: Health insurance makes unexpected medical situation affordable, but they don’t necessarily cover everything. In such a situation, going to a collection agent for some emergency funds at a very high-interest rate will cause more stress to you. Instead, opting for a personal loan makes more sense. Most of the personal loans are unsecured loan which means that you can use them for varied purposes.
Education Expenses: Most financial experts would suggest that taking a loan for an appreciating asset is actually making a good use of debt. Similar is the case with student loan as it will help increase your future earning power. Hence, taking a personal loan to cover your education expenses is a smart financial choice to make.
Debt Consolidation: If you are carrying more than one debt, the chances are that you are paying a lot of money towards interest rate on all these debts. Carrying out a personal loan to pay off all other debts allows you to make one monthly payment instead of many. This will also make it easier for you to handle one loan account instead of many.
All things considering equal, a personal loan shouldn’t be taken to increase unnecessary expenses or indulge in excesses. When you take out a personal loan for consumable debt, you are actually sacrificing an opportunity to save up for your post-retirement life. The best way to save money using personal loan is to pay it also off quickly along with your other debts so that you can enjoy the fruits of your hard work.