Smart Ways to Use a Personal Loan
The personal loan continues to rank among the most popular borrowing options because they offer tremendous flexibility. Getting approval for these unsecured products is largely based on credit scores, income, and repayment history. Because local lenders place few restrictions on their use, smart community members put them to work. If an injection of cash would help you further your quality of life or professional goals, these are ways a personal loan can help.
What is a Personal Loan?
A personal loan is a borrowing option that typically provides relatively quick approvals for qualified applicants, fixed interest rates, and a static monthly repayment schedule. Lenders offer personal loan types that can be used for a variety of purposes. Consumers are often attracted to personal loans because of their flexible usage. These include funding a wedding, family vacation, buying a boat, installing a built-in pool, and other leisure expenses. By that same token, a personal loan can be strategically employed to further goals.
Smart Ways to Use a Personal Loan
In many cases, hard-working people generally view a personal loan as a way to get quick funding for a want or need they don’t have the cash to fund. In others, frugal families prefer to borrow money rather than reduce their savings accounts. But some see a personal loan as a vehicle to improve their financial health. These are smart ways to use a personal loan for goal achievement.
1: Debt Consolidation
Using a personal loan as a tool to consolidate and reduce debt is one of the smartest ways to use a personal loan. Sometimes called a “debt consolidation loan,” people who are struggling with multiple high-interest loans and credit card balances use the low-interest personal loan to pay off these accounts. This move immediately reduces outgoing monthly revenue and positions borrowers to eliminate debt. The one trick is not to rack up more high-interest debt during the personal loan repayment process.
2: Credit Score Improvement
If you’re in jeopardy of falling behind on the mortgage, monthly bills, and other obligations due to a financial shortfall, a personal loan can be a solution. The funds can be used to pay these and other expenses until your monthly income picks back up. This strategy also protects your credit score during the slowdown. By making on-time payments, your creditworthiness can only improve.
3: Business Investment
Because local lenders offer flexible use personal loans, entrepreneurs and company leaders can use them to further business goals. For example, a cash-strapped small business could invest in new equipment or inventory to increase sales and services ahead of seasonal peaks.
By calculating the relatively low interest charged by a credit union, savvy industry leaders can do the math and make an informed decision about borrowing. If the increased sales and profits are worth taking out a personal loan, the move could grow your enterprise.
4: Further Education
Ranked among the more popular applications for a personal loan, getting a degree, certificate, or paying for career training can be a great investment. Although lenders are generally open to using a personal loan to pay for a variety of educational purposes, consider how truck drivers use them.
Tractor-trailer schools typically cost $10,000 or less. People who earn their Commercial Driver’s License (CDL) promptly enter a career that pays between $40,000 and $80,000. Turning a $10,000 personal loan into annual salaries four to eight times higher is certainly a smart investment.
5: Medical Expenses
Not every American can afford the high cost of health insurance. And those with coverage often incur high deductibles that get in the way of treatment. But without good health, your quality of life can be greatly diminished. That’s why so many people turn to credit unions to secure personal loans when they need expensive procedures or unexpectedly land in the emergency room. There’s no smarter use of a personal loan than investing in your health, well-being, and quality of life.
Important Rules About Using a Personal Loan
The benefits of a personal loan can be life-altering when used smartly. By that same token, not every borrower conducts thorough due diligence or plans for seamless repayment. If a personal loan appears to be the right solution for you, these are things to consider.
1: Shop Around for the Best Rate
Corporate lenders roll out marketing campaigns to entice borrowers to apply for their products. Although persuasive, rarely can a big bank provide the low-interest rates offered by credit unions. That’s because credit unions are not-for-profit organizations that do not pay shareholders with the high interest charged on loans.
2: Check for Fees
Fees are often the “hidden” cost of taking out a personal loan. Consider tallying up the upfront fees of a personal loan product. You may find it’s more cost-effective to go with a local lender that waives unnecessary fees.
3: Budget Before You Borrow
Using a personal loan to improve your creditworthiness requires consistent, on-time repayment. If you can’t fit the cost of a personal loan into your current monthly budget, consider reaching out to a local bank and getting financial planning advice. There are professionals who help educate community members about money management and the strategic use of personal loans.
4: Calculate the Total Cost of Your Loan
It’s essential to see the forest through the trees, so to speak. That means understanding the full amount you will repay when taking out a personal loan. Consider using a personal loan calculator to compare total repayment amounts. You can enter the principal, interest rate, number of months for repayment, as well as fees. A loan calculator is a great tool to help you make the right choice.
5: Make On-Time Payments
The importance of making on-time payments cannot be understated. Responsible repayment buoys credit scores and helps borrowers position themselves for improved lending opportunities in the future. Once you have completed the repayment, you could enjoy even lower rates and enhanced benefits the next time.
Getting a Personal Loan is a Breeze with MPCU
A personal loan is a versatile financial tool that offers individuals the flexibility to borrow money based on their specific needs and goals. Successfully repaying a personal loan can contribute to building or improving one’s credit score, opening up future opportunities for better loan terms and financial stability. MPCU is here to help! If you have any questions, please contact Members Plus Credit Union today!
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