- Emma Parker
- April 4, 2022
Why would you choose a personal loan? This is a legit question that might cross your mind when you are searching for loans. The answer is quite obvious that it lets you to take out lump sum money for whatever purpose.
Your credit history and income are the critical parameters based on which your loan eligibility gets decided. These loans are a relatively easy option when it comes to the application and qualification.
Moreover, a personal loan is a better financing option than revolving credit like credit cards. You can count upon this loan option even for a petty need and for an expensive purchase also. Above all, you can grab a great loan offer simply by shopping around.
You are free to look for any loan option depending on your requirements. For example, if you want a loan that does not require you to reveal your credit history, then no credit check loans in the UK will fit you.
Don’t exploit this opportunity to get money for any needs! Make the proper use of the loan sum, or this will have a negative impact on your finances.
Figure out if Personal Loans are a Convenient Choice for You
Personal loans can bring in a multitude of opportunities provided that you are capable of making the proper use of them. Make sure how you can capitalize on it.
Save Money while Paying Debts with Personal Loans
Paying debts can be a daunting task. But if you have personal loans, you don’t have to worry. These loans can be a reason behind the increased cost of borrowing.
It is viable that you can qualify for this loan option, and the lender gets ready to offer manageable rates. You will be in a gainful situation if the loan rate is cheaper than the pending debts.
You can opt for refinancing of debts. You keep a few skills to make your mind up what is right for you. A low-interest rate would mean you will be paying less to the lender while keeping the principal amount intact.
This is an ideal way to minimize the debt burden without giving away a large amount of money.
Refinance and Club Together Several Debts
Refinancing with personal loans is a very good idea. It holds true if you are handling multiple debts. What you need to do is to combine all the debts into a single unit. In short, you should be dealing with one lender instead of many.
So, this does not force you to prioritize the debts and pay additional money in order to get rid of debts. Debt payments can be made by using various methods. The Snowball method is one of them.
In this method, your priority should be to pay back smaller debts. This will give you the motivation to disburse debts as early as possible. But this has a downside too.
This method is not meant for debts that are carrying high rates. All that it lets you do is eliminate debts. But you will not get relief from the cost of debts that you are bearing.
But with personal loans, you will have to bother least about the cost. These loans let you use the money to minimize the debt burden simply by using the trick of combining all the debts together.
When You Cannot Utilize This Refinancing Option?
You cannot reap its benefit if you are not eligible to borrow. Moreover, it would make no sense if you could not get these loans at cheaper rates. When rates are high, borrowing becomes a costly affair to tackle, and the situation goes out of your hand.
Prohibit yourself from using these loans to meet credit card debts. This card is generally used to sponsor your lifestyle needs. Exceeding credit card limits clearly indicates that you use to spend more than you can meet the expense of.
Meeting credit card debts with personal loans might induce you to build a habit of depending on credit cards for any need. Ultimately, there will be a load of more than one debt on you. It is because you are using personal loans to pay off credit card dues.
So, refinancing, in this case, is a bad idea. Don’t consider this as an option to get rid of debts until you are confident about your financial responsibilities and learn to live within a budget.
Don’t think of refinancing as an option if you are going to extend the payoff time. You will be paying additional money as interest for a longer duration. As a result, the overall cost of borrowing will increase.
When a Personal Loan is a Superior Choice to Credit Cards?
No one can deny the fact that personal loans as well as credit cards have plus and minus points. You should be aware of how you can benefit from these options ahead of making your choice.
There are reasons why you should consider a personal loan over a credit card:
You should consider a personal loan if it is offered with rates less than the credit card cost that you will have to bear. At times, few credit cards are offered with an introductory 0% APR, which is a lucrative choice.
But don’t forget that there will be an interest fee charged on every purchase that you will make using these cards. Moreover, the introductory offer would be active for limited time duration.
Visibly, getting a personal loan makes sense if you need to pay comparably a low-interest rate. This means that you don’t have to pay an additional amount in financing charges.
The Bottom Line
This blog can be a helpful guide if you are in a dilemma to decide if personal loans can be a good fit for you. You can expect to get financial help online right inside your bank account by applying for these loans.
Suppose you are a bad creditor, then would you prefer to borrow a personal loan? If your answer is no, there is also a perfect financial option to solve your problems. You are free to apply for loan options like guaranteed loans for bad credit in the UK.
At times, a credit card might seem like the most convenient choice. But personal loans are a more practical choice as you can expect to get loan money at comparatively low rates.
Emma Parker is a financial counsellor at LondonLoansBank and has been serving for over 5 years. She is a psychology graduate from the University of Glasgow. Since she has keen interest in the finance field, she pursued a diploma course in banking and finance that led her to opt for her current career. She assists people choose the best loan based on their current financial situation and credit score. As Emma understands how people react to money problems, she gives them a helping hand to solve their financial complications.