When you’re trying to save money, the last thing on your mind is getting out another loan. However, we now live in a world where sometimes it might make sense to take out a loan to save money.
However, this doesn’t mean taking out loans or credit cards without planning. Before you apply with CreditNinja.com or any other secured lender, you need to have a plan in mind to make the loan a real saving opportunity.
How do you do that? Follow our guidance below.
Use A Loan To Consolidate Your Debts
If you have multiple debts coming from different sources, it can be difficult to remember how much you are sending to whom each month.
Because of the chaotic nature of multiple debts, people in these situations are often unsure of how much expendable income they have left. This means they don’t know how much of their money is going towards bills and how much they can put into savings.
Consolidating your debts is when you take out a large loan and use that money to pay off all of your debts. This stops multiple payments from coming out of your account each month. Instead, there is just one lump sum that you need to focus on.
This helps remove the chaos, allowing you to see exactly how much debt you have left to pay.
Secondly, one giant loan is cheaper overall than multiple little loans. This is because each loan or debt you have will charge you a minimum fee alongside interest. Instead of paying multiple minimum fees and multiple interest fees, you only have to pay one.
Now your debts are easy to see, easy to understand, and cheaper to pay off.
All of this allows you to understand your financial situation, save money from lower payments and pay off your debts faster.
Get A Loan Instead Of Saving
Many people start saving in an attempt to reach a specific goal. Perhaps they want an expensive vacation, maybe they’re engaged and are saving for a wedding, or the savings could be for concert tickets from their favorite artists.
Saving for a goal can take a long time, and depending on what that goal is, you might not have time to reach the final figure.
Instead of saving, you can take out a loan for the exact amount you need and pay it back monthly. This will allow you to experience the event or item in question without worrying about money.
You’ll have the finances you need and you’ll have it in time.
With it comes to loans and credit cards, many people will stick to the same lender year after year. However, as soon as you become complacent, your lender will ramp up the interest rate.
Most lenders will entice new borrowers by offering them a low APR. This means they can borrow money with 0% interest, making it basically free, or with a super low-interest rate which is just as appealing.
However, after six months or so, that introductory offer is replaced with a higher APR rate. This means that cheap offers suddenly become expensive.
To avoid this trap, you need to close down the account as soon as it warns you of the APR increase. However, to close it down, you need to pay it off. This is where personal loans come in.
You can use the loan to pay off the credit card, opting for a low APR rate instead of sleeping into a high one.
If the loan you sign up for doesn’t fine you for paying off the debt early, you can continue this jumping method. This means paying off the loan using a new 0% APR credit card.
The idea is to avoid high-interest rates, which creep up on us when we aren’t looking. As soon as you notice an increase, jump to a new borrowing technique.
This will save you money by helping you avoid unnecessarily high charges.
Use A Loan To Lower Your Credit Card Interest Rate
One way to save money is to reduce your costs. For many people, a large cost is the interest rate on their credit card. In this instance our “loan jumping “ tip isn’t relevant as their poor credit score means they don’t have access to low or 0% APR offers.
If you have a poor credit score, it means the lenders have looked at your credit history and believe that you are a risk.
This could be due to a late payment or not having a credit history at all. Either way, something in your credit history suggests you might not pay the lender back.
You cannot change the past, but you can change the present. To make your credit history look healthy, you can take out a small personal loan that you know you can afford. Make sure the loan has an equally small term time (for example, one or two months).
When you pay off this loan, your new credit history will show how you successfully paid off a debt. The fact that the loan was small is irrelevant. This positive addition to your history will be accounted for in your credit score, allowing it to increase.
That increase will show other lenders that you can borrow effectively. As a response, you will be offered cheaper interest rates on credit cards.
Once this happens, you can follow the loan jumping technique either by opening a loan account or going straight to the cheaper credit card.
When the old account has been closed down, you’ll be left with lower credit card bills, and you can add the difference to your savings.
Many people find loans scary, but they are a handy tool to help you control your finances.
The best way to save money with a loan is through debt consolidation. Having your debts in one place can help you understand exactly how much you owe while also making the interest cheaper overall.