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Best Way to Use a Personal Loan

Posted July 19th, 2010
by Staff

If you do it right, you can use personal loans not only to save money, but also to simplify your life and save time. If you’re like most of us, you’ve probably been in the situation of having several credit cards, all with a balance, maybe another small loans or two, a few more payments on your car, and quite possible several other small bills or lines of credit that you’re paying on.

Personal loans can help you clean up a lot of that. Personal loans are widely available, to people with all kinds of credit. Of course, the better your overall credit is, the more likely you are to get good terms on a loan of any type.

Gather your bills together. It’s better to send in one check per months than to send out dozens of nickel and dime payments. In most cases, you’ll save money because personal loan rates tend to be considerably better than credit card or other high interest loans. Even if you end up spending a little more, though, it may be in your best interest simply to avoid the hassle of having a dozen or more places to write checks to every month.

If you’re able to pay off the balance on your car, you can more than justify a personal loan simply by the savings you will realize by switching to no fault insurance. And if you’re behind on some of your bills, consolidating them gives you a chance to do some housecleaning on your credit report.

Of course, there are other ways to consolidate bills, but a personal loan is among the best ways to both lump your payments together and build a positive credit line in the process. Many of the agencies, especially the government run agencies, can actually hurt your credit in the process of consolidating your bills and loans.

Of course, you’ll want to shop around a bit to get the best rate. Different banks offer different rates for different situations, and there’s no one bank or credit union that’s best across the board.

Many banks will offer you an unsecured personal loan. If you can avoid it, don’t take it. Offer collateral. Your interest rates will be better, and even if you do fall behind in your payments, the banks will work with you. In most cases, they don’t really want whatever it is you’re offering to back up the loan, they want you to pay the loan back with interest. So, as long as you’re making a good faith effort, they will generally work with you.

Photo via beaurain.nicolas

Categories: Advice



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