Is a Personal Loan Right for You?
Consider this smart option to take control of your finances.
A personal loan can be a wise choice if you’re looking to gain control of monthly bills or make important purchases in a responsible way. Such a loan can be especially useful if you want to eliminate higher-interest debt or to pay for large purchases in small, regular installments.
At a time when many Americans are simply trying to make ends meet, a personal loan can offer a convenient solution to several financial challenges. Here are three common scenarios in which taking out a personal loan can be a smart solution.
You want to pay off high-interest debt
Often, credit cards are the method of last resort for covering the cost of an unexpected or unplanned expense. But usually, interest rates on personal loans are lower than what most cards charge, which could save you thousands of dollars over the life of your loan. Personal loans also have a fixed interest rate versus a variable interest rate, so it will not change. In addition, consolidating multiple debts into one personal loan can simplify your finances substantially.
One caution: A personal loan can help improve your financial picture only if you avoid repeating the habits that led to carrying a balance on your higher-interest-rate cards in the first place.
You want to avoid the “minimum” trap
Personal loan payments are structured so you can pay off your debt efficiently and affordably, which can save you money. The reason: Each payment you make goes toward interest and principal.
Putting money toward the principal right from the start can avoid extending the life of your loan, which helps keep the cost of borrowing from ballooning. By comparison, minimum payments on many credit cards often are not enough to cover the interest charged during the period, which means your debt can keep piling up.
You want to stick to a budget
The payment terms on a personal loan are fixed, which makes it easier to find a repayment schedule that works for your budget. That makes a personal loan a convenient way to deal with unplanned expenses, such as unexpected medical or dental bills.
You also can use a personal loan to spread out the cost of major expenditures, such as funding a wedding or buying new appliances, in a way that can help you stick to your budget.
Is a personal loan right for you?
If you think a personal loan sounds like a good solution for your financial situation, click here to find out more about the borrowing options available to you through NEA Member Benefits.