4 ways through which a Personal Loan can help you save money

11 MARCH, 2020

An emergency can come knocking at any point and it is during this period that you may find yourself scrambling for extra funds. There are several options that you can pick from and one of the most viable ones is a personal loan. A personal loan is an unsecured loan that is offered to individuals wanting to serve their current needs. The finances secured through this type of loan can be used for any purpose including funding a wedding, buying a new home or even holiday expenditure. What’s more? A personal loan can also help to save your money.

If you are wondering how, here are some guidelines that you can use to save money through a personal loan:

Boost credit score – Surpassing the credit card limit or having a huge credit card debt can put you in the category of a high-utilizer. As a high-risk borrower, there is a great impact on your credit score. When you avail of a personal loan, the bank provides you with a given term to pay off the loan. It reduces your need to over-spend with your credit card. Thus, it boosts your credit score.

Budget-management – A personal loan lets you choose a repayment plan to suit your own needs. This aids in creating a financial plan that fits your present status. If you are facing issues with your finances currently, then you can opt for a lower personal loan EMI with a longer repayment tenor. Having a good hold on your budget will help you save money.

Avoid hidden costs – Most other easy financing options such as credit cards come with additional fees. Often, there may also be hidden costs that are levied and these can cause a big dent on your financial status. A personal agreement typically has a detailed fee charge that is agreed upon and you can be sure that no additional charges will be levied over time.

Debt consolidation – Debt consolidation refers to paying off liabilities or debt with the use of a new loan. As compared with other types of loans or credit cards, personal loans have a much lower interest rate. This makes it a good option to use when consolidating debt. You can pay off your debt in one EMI rather than having several high-interest EMIs. Additionally, it saves you the risk of missing out on any monthly payment and further incurring default fees.

Additional Read: 4 step guide to overcoming financial crisis

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.