Personal loans can help you get closer to meeting financial expenses and goals like home renovations, car repairs, medical bills, and moving expenses. They’re usually easy to apply for and don’t take long to process. However, personal loans can be useful for more than just covering expenses. When used correctly, here are some ways these loans may also help you save money in the long run.
Refinancing
If you took out a loan with poor credit, you might be paying higher interest rates. But if your credit score has since improved, you may be eligible for loans with lower interest rates and better terms. Taking out a new loan to repay an old one is called refinancing, and this can be a money-saving move when you can secure a comparatively lower-interest loan. You can use a personal loan to refinance car title loans, high-interest short-term loans, overdue payday loans, and more.
Debt Consolidation
Repaying multiple loans or credit card balances may mean juggling payment schedules and dates every month. Missing even one payment date can cause you to pay more in late fees and penalty interest.
Debt consolidation with a personal loan can replace multiple debts with just one, and you can use this loan to repay all your debts. Personal loans can be used to pay off car loans, outstanding credit card balances, and other types of debt. If you can obtain a lower interest rate than you were previously paying, you’ll save money in the debt consolidation process. With only one payment date to keep track of, you’ll also reduce the likelihood of missing payments and incurring fees.
Emergency Expenses
When financial emergencies strike, such as an unanticipated bill, medical expense, or unplanned travel, it’s ideal to lean on emergency savings to help you manage the situation. But when you don’t have enough saved up, larger costs may be better managed with a personal loan rather than a credit card. With a credit card, you’d have to carry a balance, and interest payments increase each month. On the other hand, personal loans carry a fixed interest rate that never changes over the life of the loan. You’ll know your monthly payments beforehand, and you can choose a loan term that works best for you. While credit cards can be helpful for manageable monthly purchases, a personal loan may work better for larger expenses.
Consider a Personal Loan for Your Financial Needs
Personal loans can help you save money if you use them under the right circumstances and stick to your payment schedule. Refinancing, debt consolidation, and covering large, unexpected expenses are just a few ways you can use this financial tool. If you decide to get a personal loan, be sure to make timely payments so that you can avoid paying extra in interest and fees, help build a positive payment history, and improve your credit over time.
