When are Personal Loans a Good Idea?
Personal loans, as we all know, can be used for anything. Very rarely will some lenders ask questions about the purpose of getting a loan, but others mostly just want to be sure that they can pay back.
Yes, personal loans are inexpensive, and they turn out to be a great option in different circumstances. Most people fail to identify the right purpose of getting a personal loan and they make the wrong decision.
When you have the eligibility to get a loan, make sure you take it for the right reason. This post aims to help you out in deciding the right factors to consider getting personal lending. But we move out, please take a note that failing to make on-time payments can be extremely harmful for the credit score. This might even restrict you from getting further loans, and FICO also backs this fact. (FICO stands for Fair Isaac Corporation that creates credit scores for individuals worldwide)
Let’s begin now!
Paying off High-Interest Debts
Of course, personal loan is expensive than any other type of loans, but it doesn’t have to be the most expensive one. For instance, if you have a payday loan, it is certain that it comes with higher rate of interest compared to personal loan from the bank.
Similarly, if you have an older personal loan with a higher interest rate, replacing it with a new loan can help you save significantly on your finances. Before you do so, confirm that there’s no penalty for prepayment charges.
Consolidation of Debt in Credit Card
At times, individuals tend to have a substantial balance on their credit cards with a high rising interest rate. If you also have multiple credit cards with considerable amount of balance, getting a personal loan can help you to save a lot. For instance, considering the latest rates, the average rate for a credit card is around 40-42% annually, while the average rate for personal loans comes to around 14-16%.
The difference helps you pay the balance quickly and with less interest at the final settlement. Additionally, it will get easier for you to keep a track of repayment amount as you will have a single debt obligation.
Improving Your Credit Score
As stated earlier also, credit score plays an important role in getting loan offers in future. So, try to improve your credit score whenever you get the opportunity. Paying off the loan on time helps improve the credit score, especially in case, there’s a history of missed payments on debts.
If the credit card mostly suggests credit card debt, adding a personal loan will consolidate your credit mix. Additionally, having different types of loans will suggest that you can handle different types responsibly.
Paying for Major Events in Your Life
When it comes to major events or purchase in your life, it can be hosting anniversary party, financing an expensive event, weeding, etc., relying a personal loan is way more effective than using on credit cards.
Reports suggest that most couples or individuals are using personal loans or any other investment to get the expenses for their wedding. Similarly, funding a trip with personal loan amount is not an ideal decision to make, unless it’s trip of your lifetime.
Personal loans from reputed vendors like ApnaPaisa can be very useful for different circumstances. Yes, they are not cheap, but offers better alternative to deal with your debt and overall poor credit score. Please feel free to share your thoughts regarding the discussion or ask your queries.