Personal loans account for only 1% of all consumer debt, and they can be a smart and responsible decision in anyone’s financial toolbox.
In fact, a personal loan can save you money or pay for itself, depending on how you use it. Are you wondering when one might be right for you? From a better credit score to refinancing opportunities, here are five essential benefits of a personal loan.
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Lower Interest on Credit Card Debt
Credit card debt has some of the highest interest rates around. Repayment can become difficult or impossible if you amass a high credit card balance. But with a personal loan, you may be able to turn things around.
The secret is to find a lower-interest personal loan to repay your credit card debt. This allows you to consolidate your debts into one bulk payment. More importantly, a lower interest rate means you’ll owe less overall.
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Home Remodeling
Many homeowners think a home remodel is an unaffordable luxury. In reality, home remodeling is an important aspect of home maintenance. When sections of your home become outdated or are in dire need of improvement, personal loans can foot the bill.
It’s a wise decision, especially when you plan on selling your home. The right home remodeling project will increase your home’s resale value by a large fraction of the project’s cost.
Research home remodeling projects beforehand to make sure you get the biggest bang for your buck.
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Car Repair
Most people rely on a car to commute to and from work. Your employment could be at risk if you can’t afford the expense of an emergency car repair. In short: It’s a necessity.
The alternative to repairing the vehicle is purchasing another car. Even in that situation, you’d probably need to rely on a personal loan to afford it.
By choosing to take out a personal loan for the car repair, you’ll avoid the hassle and expense of car shopping. Plus, you’ll get to keep your wheels, continue your commute, and stay autonomous.
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A Personal Loan Will Raise Your Credit Score
Your credit score is decided by a variety of factors. One of these is known as your credit mix, which refers to all your lines of credit. If you only carry credit card debt, a personal loan will diversify and improve your credit mix, and thus your credit score.
Video – What is My Credit Score?
As you make your monthly personal loan payments, these will also raise your credit score like any other line of credit. Your credit history will also have more data.
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Steady Repayment Term
When it comes to a credit card, the monthly payments will vary from month to month. Even the interest rate can be subject to changes and affect your ability to pay.
Personal loans don’t have this problem. The interest rate is fixed, along with the monthly payment. They’re more stable and predictable than credit cards and can help you avoid nasty financial surprises.
Don’t Fear Personal Loans
Personal loans exist because they serve a legitimate use in the market. In certain situations, they’re an excellent way to refinance your debt or pay for large unexpected expenses.
Next time you’re in a situation to benefit from a personal loan, don’t be afraid to take a plunge. Just be sure to thoroughly investigate potential lenders and read their repayment terms before you sign anything.