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    How To Use An Instant Personal Loan To Pay Off Debt In Different Ways?

    Published on January 15, 2021

    Instant persona loans are unsecured loans that can be acquired from lenders, banks, personal finance companies, and financial institutions. You can make use of personal loans in different ways to enhance your financial situation. The most efficient way to do is to aggregate and consolidate your high-interest loans with a low-interest instant personal loan. Since the applied interest rate on an instant personal loan is lower compared to credit card, the same can be used to pay off the high-interest debts in a fast way.

    Why should you use the proceeds of an instant personal to clear the credit card debt?

    Many consumers opt to clear the credit card debt with personal loan funds to alleviate their financial burden. Here are the top 5 reasons as to why it’s wise and efficient to pay off credit card debt using an online personal loan app.

    1. Decreased interest rates

    The interest rate on a 2-year fixed-term personal loan is lower when compared to the average interest rate applied on credit cards. A personal loan can assist you to save around 5 per cent of the total amount.

    2. Single monthly payments

    A personal loan executes the important function of consolidation of multiple bills into a lone monthly payment plan at a nominal interest rate. This helps you to simply your financial life by untying any temporary financial knots. When you have lesser bills to pay, it becomes convenient to confront your budget needs and in servicing other debts. When stability and consistency is achieved in repaying monthly instalment in the online personal loan app, then you can focus on making incremental progress on your remaining debt payment also.

    3. Fixed Debt Repayment Tenure

    Personal loans come equipped with a fixed repayment schedule and the final payment due date. The day on which you finally get out of debt is the last payment date. That day can be chronicled in your personal memoir as financial Independence Day.

    With credit cards, you have the opportunity to add extra debt every month. Credit card is considered as a revolving account which presents new avenues of making fresh purchases and to keep on adding new debt. In such circumstances, it would be challenging to forecast the final debt payoff date precisely.

    An instant personal loan can be categorized as a closed-end loan with final payoff date. So it would be comfortable for you to increase motivation towards fulfilling the goal of achieving financial freedom.

    In some cases, credit card interest rates are not completely transparent and are variable. When there is a fixed and unchanging interest rate on the personal loan, you can control the narrative of debt-servicing –obligations. You can also have the precise information on the date on which you will be emancipated from the financial obligations.

    4. Better credit health

    Many credit seekers are unaware that the FICO credit score model does not take personal loans into account in the calculation of the credit utilization ratio. When you clear off the debts with a personal loan, the total available credit limit increases.  This assists in decreasing the credit utilization ratio and enhances your credit score.  Moreover, instant personal loans offer reinforcement to improve your credit mix. This has the effect of creating a positive impression in the minds of the lenders as they now have trust in your capability to handle diverse types of debts in an effective and responsible way.

    5. Reduced Debt 

    A singular personal loan is sufficient enough to decrease your overall debt load. Apart from the multitude of credit card alternatives, you can also deploy a more efficient use of the money to clear the student loans or vehicle loans or other kinds of loans that you may have accrued. So, there is no need to limit the use the loan proceeds to pay off the credit card debt only. You need to make sure that you remain consistent in repaying the instant personal loans. If that doesn’t happen, it may negatively impact your credit score. 

    Some other unorthodox ways to use an instant personal loan:

    1. Wedding: Weddings in the modern generation cost a fortune. Use an instant personal loan to take care of the wedding expenses instead of using expensive credit cards.

    2. Home renovation: Instant personal loans can be used to make your residence more energy-efficient. This will help to remodel your home and in addition to that, get some attractive tax deductions in the future.

    3. Trip: Online personal loan app can be used to plan your family vacations. Make sure you’re not solely dependent on credit cards for ensuring an exhilarating vacation. This would only enhance your debt. Lower interest personal loans can make your exotic vacation, very budget friendly.

    4. Medical bills: The present pandemic has brought the core realities of our health into the magnifying glass. Life is the most treasured option, and it costs a huge fortune to cover hospitalization expenses. Unless you have sufficient health insurance coverage, it is not possible to cover all medical bills. 

    5. Down-payment: There are several expenses that can be attributed to the home buying phase. The home loan amount may not be entirely enough to cover interior décor too. In some cases, funds may be required to make down payment. An instant personal loan can come to your rescue when down payments are due and avoiding delays in the mortgage process.

    6. Payday loans: These loans are very expensive with the interest rates reaching up to more than 400%. Multiple payday loans can be consolidated and paid by a single personal loan. The interest rate of an instant personal loan is very low compared to payday loans. To eliminate stress and lead a carefree life, you can clear your payday loans with a single personal loan.

    Conclusion

    Credit card debt takes you down the spiral of bankruptcy and tanks your credit score. Plus, the constant collection calls ruin your day. In this scenario, you can use an instant personal loan to clear the high-interest credit card balance and increase your credit score within the right time period.