Savings are not always enough to sail through certain emergencies in life, including big purchases. In situations like these, most people resort to taking a personal loan. Without a doubt, personal loans have payable interest rates on the loan amount. But what if we tell you that taking a personal loan can help you save your hard-earned money in the long run? The following are five of the most important ways on how you can save some money by opting for a personal loan:
- Debt Consolidation: If you are repaying multiple loans—education loan, credit cards outstanding, or vehicle loan—and are finding it hard to manage all of them, then taking a personal loan is a sensible move. Personal loans free you of multiple liabilities.
Also, the personal loan will be at a lower interest rate (8-13%) compared to the exorbitantly high interest rate (20-25%) on credit cards. You will end up saving a lot of money by opting for this route.
- Credit Score Improvement: If you are not able to service the principal or interest on your existing loan or have a credit card debt, it will negatively impact your credit score. Instead, when you take a personal loan, which is at a lower interest rate, it eases your significantly higher monthly instalment amount. With your lowered EMIs, you are less likely to default, which ultimately will help you increase your credit score.
Now, when your credit score is decent, you can easily apply for new loans in the future and negotiate interest rates on your loan. A lower interest rate means lower interest outgo that effectively translates into savings in terms of money.
- Flexible Repayment Options: Lenders offer flexible repayment options based on your monthly cash flows. You can visit platforms such as Finserv MARKETS to compare multiple personal loan options to get a lucrative deal.
The option of repaying your loan early (pre-closure) lets you start saving money once the loan is repaid. A foreclosure also enables you to save money on the interest you would have paid if you continued the loan till the end of its tenor.
- No more Miscellaneous Fees and Charges: Besides attracting higher interest rates, credit cards have many hidden charges. Likewise, many loans have added charges such as late fees, processing charges, and penalty charges. Even if you default by a single day, you will be liable to pay interest, penalty, fee, along with the principal amount.
You can circumvent all this by availing a personal loan that usually has only a minuscule processing fee and comparatively lower interest rates. Thus, helping you avoid these hidden fees and saving money.
- Funding a Big-Ticket Purchase: Some big-ticket purchases can deplete your entire savings. In such scenarios, it is better to take a personal loan with a lower interest rate than to liquidate your investment portfolio or prematurely withdraw a fixed deposit.
A personal loan will be divided into monthly instalments that you can pay with your monthly income. Ensure that the monthly instalment amount does not exceed 35-40% of your monthly salary—advice reiterated by money managers and financial advisors in personal finance sessions.
Personal loans are a safe, inexpensive, and practical choice for people who need to cover their expenses. To know more about personal loans and compare multiple loan options, visit Finserv MARKETS by clicking here. Happy Savings!