Personal loans are big-ticket, collateral-free loans that you can borrow to meet any of your urgent or planned expenses, including a wedding, education, travel, home renovation, medical emergency, or debt consolidation. Since no security is required to get these loans, they are often approved based on your income, repayment capacity, credit score, and payment history. People applying for a personal loan must have a credit score of at least 725 or above to get their loan approved easily.
While a personal loan can take care of your unexpected expenses or other financial requirements, it can even help in saving money. Let’s see how.
1. Provide Funds and Keep Your Savings Intact for Big Expenses
When a momentous occasion happens in your life, and you need to borrow money for an expensive one-time expense, taking a personal loan may be the most practical way of covering that expense rather than spending your savings. Personal loans are inexpensive when compared to other types of finance options such as credit cards or bank overdrafts — all while still giving you some leeway.
Since personal loans allow usage on anything from vacations to weddings or medical procedures, they can help with many situations that come up in life. The best thing is that you do not need to touch your savings and you can repay your loan in EMIs over 12 to 48 months.
However, make sure you do not spend more than half of your disposable income each month because this will create difficulty in paying your EMIs, which could lead to defaulting before long. Missing EMI payments can reduce your credit score and it may become more difficult for you to take out loans in the future.
2. Help You to Consolidate Debts and Save Money
You can take advantage of a personal loan to pay off your other high-interest debts. By consolidating your debts like this, you can save money on interest for loans and credit cards by paying them faster or all at once with the help of a low-interest personal loan.
However, ensure that when making repayments, always check with your bank about their prepayment policies, as some lenders will charge penalties for not completing the loan tenure. With this, you won’t be able to save much money.
3. Flexible Repayment Plans Increase Your Savings
Personal loans from reliable lenders have flexible repayment plans that you can choose as per your repayment capacity and monthly budget. You can use a personal loan EMI calculator to find the best loan plan with EMIs you can easily afford.
If you choose a longer loan tenure, your EMI amount will decrease but you will end up paying more for interest outgo. But if you choose a shorter loan tenure, your EMI amount will increase but your interest outgo will decrease. So, you will save money both ways. Whether you want to save money on EMIs or interest outgo depends on your personal choice and financial comfort.
4. Improved Credit Score and Save Money in the Future
Defaulting on your loan repayments impacts your credit score and poses you as a high-risk borrower to the lenders. By missing your EMIs, you not only stay stuck in the circle of debt but also find difficulty in getting loan approvals in the future. However, if you pay your personal loan EMIs on time, you ultimately improve your credit score and it becomes easier for you to get loan approvals at lower interest rates in the future.
This way, the credit score you improve with your personal loan can help you save money on interest rate later for other loans. They also help in diversifying your credit profile and reducing your credit utilization ratio, thereby improving your credit score and helping you save more money in the future. If you have other loans that you are finding difficult to repay on time, you can transfer them to a personal loan and choose a convenient repayment plan. This will improve your credit score and save you money.
5. Freedom from Extra Charges
Credit card debts are something everyone complains about. Besides accruing debt at a high-interest rate, users also need to pay hefty penalty charges for missing even a single bill payment. These amounts keep adding to the outstanding amount and make it even more difficult for the user to get out of it.
By availing a personal loan, you can not only pay your credit card debt and charges but also repay your other loans. While a personal loan may also come with some processing fee of its own, in the longer run, it is insignificant compared to the accruing debts with credit cards and other high-interest loans. This gives you freedom from extra charges so that you can start saving money.
Clix Capital is a trusted NBFC that offers personal loans for varied purposes. You can apply for a personal loan of up to ₹ 25 lakhs and repay it in 12 to 48 months. Avail our hassle-free loan application procedure now and get your loan approval in as little as 15 minutes*. Just get your documents verified online and you are good to receive your loan amount almost instantly.
You can also reach out to us at firstname.lastname@example.org or call us at 1800 200 9898
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