Personal Loan Is A Great Ideaby Admin | September 8, 2021
5 Instances in which a Personal Loan might be a good idea:
1. Consolidate your Credit Cards
If you have several credit cards and you use your credit lines to the maximum, apply for a personal loan to consolidate all your debts into one monthly payment.
Another reason to do this is to get a lower interest rate on the loan than the Annual Percentage Rate (APR) of your credit cards.
For example, the average APR on a personal loan can be around 30% per year, while the average APR on a credit card can be as high as 60% per year. However irate varies and depends on your Credit Score.
2. Refinance Other Types of Loans
As in point one, a personal loan could help you consolidate your debts and lower the cost of any type of credit. However, before applying for a personal loan to refinance another type of credit, consider that some types of credit, such as mortgage loans, are tax deductible.
Analyze the advantages and disadvantages of each option and choose the one that best suits your needs.
3. Finance a Purchase
Using a personal loan to finance a purchase is a good decision as long as you know how to distinguish between a desire and a need. Once you have defined the level of need to acquire that product or service, don't forget to consider several financing options before choosing one.
In many cases, it may be more convenient to apply for a personal loan to pay for a purchase than to acquire some type of financing directly from the seller or supplier. Never make a financing decision at the place where you are going to make the purchase, give yourself the opportunity to review more options so you can choose the one that is most competitive.
4. Paying a large expense
This applies to any type of situation, expected or unexpected: a medical accident, a wedding, a vacation, a return to school, etc. A personal loan might be a good idea if you are going to have to make a large expense and need to have a longer period of time than a month to pay it off.
This will keep you from paying high interest rates on your credit card while also keeping your credit history in good shape.
5. Improve Your Credit Score
A personal loan could improve your credit rating in three ways: First, it prevents you from having to default on your credit cards by giving you a more flexible financing option.
Second, it may lower your available credit utilization ratio - the total amount of credit you have used against your total credit line. The smaller this ratio, the better your score will be because the personal loan increases the amount of credit you have available for your use.
Third, if your credit bureau shows mostly credit cards, a personal loan could expand the range of financial services you have taken out and this could boost your credit rating.
In conclusion, a personal loan can be a very useful financial tool as long as you use it responsibly.