While applying for a personal loan, consider the credibility of your CIBIL score, interest rates and other fees and charges required. Several websites have thorough information on the policies for applying for a personal loan in a particular month.
With instant disbursal, minimum documentation and competitive interest rates, a personal loan is a great option to avail of and here are 5 possible scenarios where an instant personal loan might just save you from trouble.
- Credit Card debts
A personal loan is a great choice if you have a huge balance on a credit card with a high interest rate, such as a credit card with a high-interest rate. A credit card currently has an average interest rate of 19.24%, while a personal loan carries an average rate of 9.41%. The difference between the two may allow you to pay down the balance faster and pay lower interest over the duration of the loan. The advantage of having a single debt obligation is to keep track of and repay it easier rather than having multiple debt obligations.
A high rate credit card, for instance, can lead to an unprecedented amount of debt in no time at all. Alternatively, you may have outstanding loans that are straining your finances and shaking your financial stability.
A default on your loan can sometimes occur in just 24 hours if you do not pay your EMIs. If you are in such a bind, an emergency loan can help you out. Consolidating your high-interest debt through a personal loan is a very useful and sustainable option in such cases.
- House Expenses
Probably it would be less expensive to get a personal loan than to finance through the seller or use a credit card if you buy new appliances or install a new furnace. If your home has built up any equity, consider a home equity loan or mortgage or a home equity line of credit could be comparatively less expensive. Both debts are secured, so your home will likely be at risk. During a renovation or repair project, such funds should be available immediately to avoid any delay.
The repair’s cost can be financed by your savings or an instant personal loan. You may want to compare loans from various banks and non-banking finance companies(NBFCs) before deciding to go with one lender.
- High Interest Debts:
Despite being more expensive than some other loan types, a personal loan is not necessarily the most expensive. You would pay higher interest rates on payday loans than on bank loans, for example. You may be able to save money if you replace an older personal loan with a new one if its interest rate is higher than you are eligible for today.
However, if you are planning on refinancing, make sure you ask if the old loan has a prepayment penalty or if there will be application or origination fees on the new loan. There are sometimes substantial fees associated with these transactions.
- Major Event Expenses:
There might come time for major personal events which call for a hefty expenditure like birthdays, weddings, engagement et cetera. A personal loan would rather be cheaper than a credit card if you use that to pay for it. You might also consider scaling back some of these events if they lead to accumulating debt for years to come. For example, in a much-awaited vacation, borrowing money to pay for it is not a great idea.
- Improving Credit Score:
If you have missed repayments on other debts in the past, getting a personal loan and paying it off on time could help improve your credit score. It is also possible to improve your credit score by adding a personal loan if your credit report shows mostly credit card debt. Different types of loans, and the ability to handle them responsibly, are considered positives for your score.
It is not wise to borrow funds you don’t need if you are trying to improve your credit score. It’s always better to keep making payments on time to your other bills while also keeping an eye on your credit utilization ratio, which is the amount you are using at any given time compared with the amount disbursed to you.
