Whether you realize it or not, personal loans are incredibly valuable in this day and age. But you might not know this or even think about it if you have credit cards available and immediately at hand.
To help you better understand the value and benefits of a personal loan, we are going to share some important details with you about this topic today. Please pay attention to these benefits and finally learn the truth.
1. Personal Loan Interest Rates Are Lower Than Credit Card Interest Rates
Do you have any credit cards with balances on them? The odds are that you’re paying anywhere from 22.9% interest to 24.9% interest on those balances every month.
Guess what? When you take out a personal loan, your interest rates are going to be a lot lower. You may end up paying somewhere in the neighborhood of half the interest that you would pay on a credit card.
So, the financially savvy individual recognizes the value of personal loans. They will take out a loan, pay off their credit card balances, and literally cut their interest payments in half in the blink of an eye.
2. Usage Flexibility
The great thing about personal loans is that you can use them in many different ways and for many different reasons.
With a credit card account, your hands are often tied to using them in local supermarkets, department stores, auto repair shops and other types of retail businesses.
But when it comes to a personal loan, the flexibility that it offers you is definitely going to be a huge benefit.
Why? Well, some vendors do not take credit cards even to this day. So you’ll need to have some cash on hand to pay these companies when you do business with them.
Plus, many small business owners are happy to provide cash discounts to their customers that pay them with cash.
Why?
Well, when you use a credit card they will have to pay charge card and vendor fees. Cash puts more money in their pocket over the long run, and they are willing to pass the savings along to their satisfied customers.
3. Add Diversity to Your Credit Profile
More than anything else, creditors love it when consumers have a diverse credit profile. So, taking out a personal loan will help to diversify your credit profile even further and prove to potential lenders that you are capable of paying an installment loan on time, every time, until you’ve satisfied the balance.
So, by taking out a personal loan you’re also going to increase your credit score because of the additional diversity.
According to Personalloan.co, experts discussing what rates I should expect with a personal loan, “An individual with excellent credit is likely to find many lenders willing to issue credit at very competitive interest rates.”
4. Finally Eliminate All of Your Variable Interest Rates and Revolving Balances
As long as you have open credit cards, you will be able to continuously spend money as long as your credit line isn’t maxed out.
So, you can continue to make payments until the cows come home, but your balance is going to increase if you turn around and spend more money while using your credit card to buy various goods and services.
When you take out a fixed rate personal loan, your interest payments will be stable, and as the balance goes down, your interest payments are going to be lower as you pay down your principle balance.
Plus, you will pay off your loan within the specified payment terms. And you won’t have the ability to continue dipping into a revolving credit line while burying yourself in a hole even deeper.
Conclusion
There are many benefits to taking out a personal loan. Please pay attention to what we’ve said today and decide if it’s the right choice to meet your needs.
