When we think about taking out loans, we often think about a lot of negatives. Loans are associated with interest rates that might pull people into debt. However, there are some advantages that come with a loan, and it will depend on what your purpose of using the money for. If you want to know how to take advantage of a loan, there are some choices available to you.
Build Your Credit (Believe It Or Not)
Having a credit card and making your payments on time does increase your credit score. However, if you’re establishing a different form of credit, this can contribute to your overall score as well. This sounds silly, but the different variations of credit have actually contributed to your credit. When you do apply for things like a loan, generally, they’ll run a credit check, and this will decrease your credit marginally for a period. By making your payments on both your credit card and your loan on time, you’ll be contributing to your credit in the long-term.
Have All of Your Debt Together
If you have a balance owing on a phone bill, your credit card, and another loan, keeping up with all of your payments can be a hassle. By trying to make all of your payments on different dates, and with different companies, you could accidentally skip a day and incur penalties on both your credit and finances. If you can find a business that provides a lower interest rate than your current companies, you’re able to consolidate your debt with one loan. The loan experts at Jacaranda Finance posted the interest rates of various loan companies in comparison to what they offer. As you can see, many options are available out there, and it’s only up to you to do your research and find which one suits your needs and which will offer you smaller interest rates and other perks.
They Might Offer a Better Interest Rate Than A Credit Card
Some loan companies offer a competitive interest rate even compared to credit card companies. Credit card companies may charge an interest rate of 18-21% and over an extended period of time you’ll end up paying far more than you borrowed. If you can secure a loan with a company that offers a lower interest rate than this, you’ll be able to avoid succumbing to those nasty high interest rate cards. If you have a card like a debit visa, you’ll also be able to make these purchases online directly without using your credit card.
You Get Your Money Faster
If you’re worried about having to pay back the cash advance interest rate on your credit card, chances are you should be. These interest rates are several points above what they usually charge you. Loans offers you the ability to use cash without giving you an increase in interest. They also have a tendency to be approved faster, and many online options will directly deposit funds into your account. If you want to apply for another credit card, you’ll have to complete an application, and wait for your card in the mail. If you’re in an emergency situation and you need assistance paying for something vital (like a car tire/part), a loan is going to be a near instantaneous solution. Trying to explain to your place of employment you have to wait for a credit card to come in the mail to drive your car to work, probably isn’t going to make them feel the best about your trustworthiness.
Options and Bonuses
Sometimes loan agencies will offer an interest free incentive where first-time customers have a grace period where there is no interest. If you’re looking to make a purchase and know you’ll be getting paid within this grace period, you’ll be safe to borrow the loan and pay it back before accruing interest. Just make sure you read the terms and conditions of the contract. Repeat business with the same borrower can offer you more incentives like lower interest rates, and extended payment periods.
Loans can serve a purpose, and they aren’t always evil, you just need to know how to make them work for you. You can use loans to build your credit by having a larger credit portfolio and making your payments on time. You can choose to consolidate your debt to make payments more concise and possibly have them at a lower interest rate. They offer a faster alternative to credit cards and sometimes have a lower interest rate. Loan companies can also offer incentives and bonuses you can take advantage of. Just remember to be responsible, and don’t borrow money you can’t pay back, and you’ll be able to take advantage of loans.