Many people opt for a personal loan every now and then. While personal loans help to fund that dream trip to a tropical destination or handle an unexpected expense, they could also help you save your money if used properly. In this article, we’ll have a look at some ways through which a personal loan can help you save your money.
You may be wondering why most financial experts always suggest saving money. Well, for starters, one should save money as the future is unpredictable. Saving money may help you remain financially secure as well as shield you against emergencies. Each individual faces a financial crisis at some point in life, and during such times, taking a personal loan may make sense. That’s because they give us quick access to instant cash and help meet urgent expenses. Apart from this, personal loans can also help save money in the long run. But before learning how you can save your money through personal loans, let’s first understand what a personal loan really is.
Personal Loan – What is it?
A personal loan is basically a kind of unsecured loan that an individual takes from an NBFC or a financial institute to meet his/her financial needs. It can be utilized to refinance a student loan, consolidate credit card debt, purchase a car or a house, fund a wedding, etc. While personal loans can help you tackle expected financial needs, they can prove to help save money as well.
How Can you Save your Money through Personal Loans?
Personal loans can help save money in many ways if used properly. A few of them are:
- Low-interest Rates:
When compared to the interest rates charged on credit cards, the personal loan interest rates fall on the lower side. Thus, one can use personal loans instead of credit cards to make a purchase and save their money.
- Debt Consolidation:
One can avail of a huge personal loan at low-interest rates to pay for other high-interest liabilities or debts. Rather than paying different loans at different times or paying the interest on your credit card dues each month, it’s better to get a large personal loan and pay for these liabilities or debts all at once. But make sure that you check the prepayment terms and conditions of your money-lending institution as a few of them charge penalties if you don’t complete the loan tenure or charge an additional fee for foreclosing the loan.
- Freedom from Hidden Charges:
Often credit cardholders complain about their credit card company charging additional fees under the illusion of offering better services. This, in turn, adds to the elevating credit card bill, therefore, making it challenging to repay the resulting high amount. On the other hand, personal loans that are available at average to high rate of interest are still a cost-effective option than a credit card loan. Besides, before signing the loan contract, you should always check for any additional charges that will be included in the EMI amount. You have the option to prevent those charges from being added to the loan, thus giving you relief from sudden unexpected extra costs.
- Clever Repayment Plans to Enhance Savings:
Before you avail of a personal loan, make sure that you choose a smart repayment plan based on your present financial status to improve your savings. Those expecting to have a better financial situation in the future, because of promotion at work, for instance, can opt for a step-up loan repayment option. Here, the EMI scheme begins at lower interest rates and gradually increases over time.
These are a few ways through which you can save money using a personal loan. Make sure that you consider these the next time you wish to save your money through personal loans.