Recent tough times have left many people feeling that money is tight, which does not leave much breathing room for fun and extras. You may have maxed out your credit cards and the high-interest rates leave you thinking you will be in debt for a long time. One way to get some financial relief may be to get a personal loan.
The Best Option
Before you even think about getting a loan of any kind, you will do yourself a favor if you can use alternate methods of getting financial relief. Two things that you might do to start getting out of debt is to cut out unnecessary spending; and, secondly, to eliminate bills such as gym memberships, cable TV, daily lattes, eating out, and more. Oftentimes, when people eliminate the extras, they find that money is not so tight anymore.
Another thing that some might try – if you have good credit, would be to get a balance transfer credit card. This type of credit card will give you up to 24 months of zero interest on any balance you transfer to the new card – usually within 60 days or less. It will only help you, though, if you stop charging anything else to any credit card.
About Personal Loans
A personal loan is a loan obtained from a bank. It can help you in three ways:
- Lower interest rates
- A single payment each month
- Lower payments.
No Collateral Needed
A personal loan is one that you take out in your own name. You will not need any collateral if you have rather decent credit. Although interest will be charged on the loan, it will be lower than that on most credit cards. This can save you a lot of money in the long run.
Pay Off Credit Card Loans
Getting a personal loan in the amount of your debt will help you breathe a sigh of relief. You can borrow an amount equal to your debt and pay off your bills. This will give you a single bill each month and it will be lower than you were paying before. It can serve as your own debt consolidation plan.
The only bill you do not want to put into your personal loan is any debt on a credit card that has a lower interest rate than the loan. If you did, it would defeat the purpose of the loan – which is to reduce debt, not add to it. A personal loan will reduce the overall interest and help you relax.
Other Uses of a Personal Loan
As its name implies, a personal loan is yours to use as you want. It could be used to pay off a medical bill, get you through a tight spot, or even buy an item you want. It could even be used to get into college, business, or travel.
Before getting a personal loan, take the time needed to find a lender with the lowest interest rates and the best terms of repayment. Make sure you can handle the payments or it will damage your credit if you run into problems.
Staying Out of Debt
The best way to stay out of debt is to avoid living above your income. Once you get out of debt, if you use a credit card at all, pay it off in full each month. By doing this, you will not pay any interest, and be sure to always pay on time. Late payments will hurt your credit score more than you want and it could put you into a much higher interest rate.