Some people view loans as a liability that is best avoided if you can help it and that would be a fair view if you took out a loan just to put some extra cash in your hand for no specific reason, but you need to think creatively when it comes to personal finance and there are some situations where taking out a personal loan could be a smart move.
Here is an overview of some scenarios where a personal loan could be a viable option, including an insight into their versatility, how to save money on your borrowing costs, plus a possible way to improve your credit score when you take out a personal loan.
Plenty of options with a personal loan
There are plenty of personal loan options, and one of the key attributes of this type of lending is that it gives you the freedom to spend the money you borrow on almost anything you want to.
That versatility is welcomed of course but it goes without saying that you need to be sensible and borrow wisely if you want to retain a tight control over your finances.
You could use a personal loan from 24Cash to pay off some debts like a credit card balance, or you might need the cash to pay for an unexpected repair bill that you don’t have the money for at the moment.
The fundamental point about personal loans is that you need to think carefully whether your reasons for borrowing are justified and work out a sensible plan for how you are going to pay it back as quickly as possible.
A way to save money
Taking out a personal loan could potentially save you money. If you think about it, if you have a credit card debt that is costing an annual interest charge of 22% or more, and you take out a personal loan to clear the credit card balance at an interest rate that is a third of the credit card’s APR, you are going to be saving money.
You are not reducing your debt balance at that point because you are transferring the amount you owe to another lender, but if that new loan is at a much lower interest rate it makes sense to use a personal loan to reduce the amount you have to pay back on your existing debt.
Build a better profile
It might sound like fuzzy logic to suggest that taking out a personal loan could potentially boost your credit score, but that is a scenario that is certainly possible.
It is not absolutely certain that this strategy will result in an improved credit score, although you can understand how this idea could adjust your debt usage ratio more positively, especially if you use the personal loan to clear a credit card balance.
Make sure you check your credit score regularly to see what lenders think of your credit profile and payment performance. It should also give you an insight into whether taking out a personal loan could boost your score.
You might think it is stretching it to suggest the idea that debt could be your friend but as you can see there are a few situations where borrowing sensibly, and for the right reasons, could pay off.