Personal loans can prove handy if you need cash urgently to meet an unexpected expense or tide over a financial crisis. They are easy to apply for and lenders typically approve them quickly without too much of a fuss. However, most people do not know you can use personal loans to save money. Some of the best ways of saving money with personal loans include:
Pay Off Credit Card Debt
If you have maxed out your credit cards and finding it hard to make the minimum monthly payment on the due dates, you could be heading for trouble. You will be paying a stiff interest rate on the rollover amounts, steep late payment charges, and damaging your credit score. In most cases, you can save money on the interest expense and late fees by taking a personal cash advance to repay the credit card outstanding fully. You can save up to 30% due to the difference in the interest rates between personal loans and credit cards. However, you will get the best rates only if you have a credit score of more than 700. If you can’t wait to improve your rating, you should get a co-signer with good credit on board when you apply. You can pay down the principal faster with the cash you save on the interest expense.
Replace Credit Card Financing
If you are considering paying for a big expense like a gadget or a vacation with a credit card, you could consider taking a loan from a personal finance company instead since the interest rate is far lesser, saving you substantial money over the tenor of the repayment. Use an online calculator to find out the difference between personal loans and credit cards and to see how much you can repay every month without stressing out your budget. What’s more, using cold cash may get you a better discount on your purchase.
Swap High-Interest Debt
If you have taken on debts with high interest rates, you can consider consolidating them. You can save a lot of money by swapping the total outstanding with a personal cash advance from a lender at a far lower interest rate. You can pay down your debt even faster, potentially saving you a lot of interest expense with the money you save on the interest. Consolidating debt will also save you a lot of effort in tracking the different monthly statements and ensuring you make the due payments on time because all you need to do is to pay one payment every month to the lender. According to Bank Rate, consolidating debt helps you stay organized.
One of the dangers of high amounts of debt and missing monthly payments is the damage to your credit score. If you use personal loans to pay your card dues, your credit utilization ratio will improve. Also, regular monthly repayments on schedule will repair your credit score and reduce the interest rate on future borrowings. While personal loans can save you a lot of money and get your finances and credit score back on track, you must always be prudent and spend only as much as you can repay comfortably.