It’s not strange to run out of cash. It is very common especially if you are a low-income earner. In such a situation, taking a personal loan can help save the situation. Personal loans can save you whether it is a medical need, business boost or any other financial emergency. This type of loan is an unsecured loan (no collateral) and you can be given depending on your credit history. In case you have good credit, then you have more chances of getting approval and can get a relatively low-interest rate. There are various sources you can get personal loans whether offline and online. These loans come with their own set of benefits.
Lower Interest Rates
Personal loans come with relatively low-interest rates compared to credit cards and other loans. If you have good credit, you even qualify for a very attractive rate. Unlike credit card debts that can charge you as high as 15%, personal loans can charge you as low as 6%. This is in case you have good credit. The difference in rate can result in huge savings especially if you’re planning to make a substantial purchase.
Personal loans are great sources of quick funding. You can use the money to accomplish various tasks that need quick cash like paying for medical bills following sudden illnesses or accidents, making home remodeling and renovation, or even making major car repairs. The quick cash can also aid you to boost your start-up, pay for a deposit on office lease or purchase needed equipment in your business. It is quite different from other types of loans that may restrict you on what and how you should use the money for. This makes it a very flexible option.
Personal loans have the most flexible repayment terms. The interest you will pay for the loan is predetermined. In most cases, the amount is fixed and you can pay at the end of every month. You can choose to repay the loan completely depending on your financial condition. This means you can budget for your money accordingly. Before taking the loan, it is paramount to consider the repayment terms. A personal loan with flexible payment terms allows you to reduce the equated monthly installments which help to avoid adding up the principal amount and interest. It also allows you to decide the amount you will pay each month which helps you to eliminate unnecessary penalties resulting from late payments.
Consolidate Your Debt
Personal loans are helpful in case you’re dealing with huge debts like credit card and student loan debts. Personal loans have lower interest rates. You can take advantage of using it for debt consolidation. By consolidating debt with a personal loan, you save money on interest and pay your dues faster. When you combine several loans into one, you also eradicate the problem of late payments due to forgetting. Besides, you can also track your debt well and save money in the end by reducing the repayment costs.
Improve Your Credit Score
A personal loan can aid you to improve your score. In case your report only displays credit card debts, a personal loan can bring an account mix which is vital in building your score.
The loan also helps to reduce your credit utilization ratio. This is the amount of credit you use in relation to your limit. Your score can improve when you have low total credit. This type of loan can increase the amount that is available for use. Additionally, the fact that personal loans have flexible repayment terms means you can build a good credit score.
Streamline Your Cash Flows
In case you know one or two of your clients won’t pay you on time, you can use a personal loan to smoothen your cash flow situation. Most personal loans come handy and can help bridge those temporary gaps in your financial life. Alternatively, you can use to get a line of credit rather than an installment loan. A personal line of credit can give you a lower interest rate and you can connect it with your checking account.
Although you still pay interest like other types of loans, personal loans come with added flexibility and convenience. You can use it to improve your credit score, get quick cash and consolidate debt. These loans have relatively lower interest rates and flexible payment terms which are ideal in case you’re struggling with a tough financial life.