These days, many people face an emergency at some point in life where they need quick cash. In most cases, availing a personal loan is the most convenient and fastest form of getting the money. In India, a large number of people apply for personal loans today to help get cash for immediate expenses. The reasons for a personal loan could be medical expenses, house loan, or even traveling for your dream trip.
A personal loan is nothing but quick money with a fixed interest rate that can help you consolidate big purchases and emergencies. Once you decide to take a personal loan, you need to repay the loan in less than five years or so. However, you have flexibility and choices while you choose a personal loan.
While applying for a personal loan, depending on your credit history, you may also be able to qualify for a low-interest rate and save money as compared to the interest rates paid on credit cards, which are typically higher.
Apart from getting yourself a personal loan with a low-interest rate, personal loans also help you improve your credit background as well as save more money. You would have often come across that financial planners or advisors always suggesting methods to save money. And for beginners, it is vital to save money for the future, which will help you be financially secure and act as a safety net during emergencies.
With an ever-increasing population to redefine the financial landscape in India, tech-savvy, fast-paced people are all set to dive in the shortest routes of earning instant money. Driven by instant gratification, many people often opt for personal loans now and then. And while personal loans can take care of unexpected expenses or any other requirement, they can also help save money, yes! Let us look at some ways of how a personal loan can help you save money in the long-run:
How Can Personal Loans Help?
- Lower Interest Rates
It’s time to ditch the high-interest rates. Taking a personal loan can be more flexible than other lending options. This means you can repay the loan within the range from 2 – 7 years. However, it is advised that you come up with a concrete plan to repay off the loan before the term ends. This way, you can also save more on the interest rates, depending on how soon you can clear the loan. One of the most effective financial strategies, you can consider opting for a personal loan because the interest rates charged on them are much lower than charged on most credit cards or even home loans.
Hence, opting for personal loans can be well used to make purchases instead of credit cards. This can be the next money-saving method.
- Consolidation of debts
If you are on a credit card debt and are unable to repay it because the payment is too high due to the high-interest rate, you can avail a personal loan on the low-interest rate to pay off your debts and save money. Taking a loan on a low interest-rate can be an excellent option to clear off all your debts and also protect from it. For example, you can repay them faster or at once using a personal loan.
Usually, interest rates on credit cards are about 20% per annum, and the prices on personal loans vary between the range from 8% – 12% per annum in India. Hence, it is advised to opt for personal loans to pay off any credit card debts to save a significant amount on the total payment. However, while this option is valid, do check with your bank about their payment policies as some of them may charge penalties of not completing the loan tenure within a given closure time.
- Improve the credit history/score
When you have debts to pay through credit cards and are seen to utilize the maximum credit limit of your card, your credit score will be higher. And once you have crossed the limit, lenders will consider you as a high-risk borrower. This is where opting for personal loans can come into action. Credit card debts are revolving loans, unlike personal loans that come with a fixed repayment term. There’s a timeline to pay back, but you can decide the tenure of the repayment. This will help you to lower your credit utilization and improve your credit history.
- Claiming your tax benefits
There are no tax benefits on personal loans. However, if you avail them of your house or making a down payment for it, then you can be eligible for a tax benefit. To avail this, you will need to provide proper receipts and documents before the bank issues you the loan. As much as you would like to avoid overspending, saving up those taxes can be a daunting task too, but must be your priority. This can be a great way to save up more money.
- Smart repay methods to raise savings.
To further enhance your savings, you can use the most appropriate repayment plan depending on your current financial status before applying for a personal loan. If you are currently working and expecting a promotion, for example, you can consider using for the step-up repayment option where the EMI starts at low-interest rates and gradually increases over time. Another option you can look at is the pre-payment method. By foreclosing your loans, you can save up on the interest payments. However, it is advised to check if this option includes any penalty or not.
- Meeting big expenses / one-time expenses.
Availing a personal loan is relatively beneficial when you have one big purchase. Everyone in their point of life faces a situation where they need quick cash for a one-time expense. Personal loans not only provide you with fast cash but also provides you with the liberty to repay the money over the tenure years. This is the most practical and inexpensive way to borrow money for that requirement – be it related to medical expenses, vacations, or a consumer product. These finances can easily be purchased more cheaply through personal loans as compared to credit cards, and given the flexibility of the repayments, you can also manage your budget effectively.
To avoid hidden costs and fees.
With most credit card companies, if you repay the personal loans within the tenure period, you do not have to pay any hidden charges or interests too. This helps in potentially saving you a considerable amount of money. Taking a personal loan is a lot better in terms of funding a significant expense rather than using a credit card for the same. You must carefully vet through the loan details and can be sure that they are no hidden fees or additional costs that may creep you out.
If you want to avail of a lower interest rate and save your money too, the only way to do that is by taking a personal loan. Use the above seven hacks to reduce the amount of what you usually pay as interest rates and get out of any new debts. Personal loans will only help you save more and faster than you thought you could otherwise. Moreover, these are just initial tips to get you started; the mileage will vary.
Aahna Gandhi is an enthusiast traveller, writer and a PR Professional. She likes sharing memorable moments from her travels and inspire others to live a life full of wonder. Known for her content, she has worked for travel, technology, lifestyle, health sectors as well as finance.
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