There are many reasons why someone may take out a loan; they may need additional cash to fund the purchase of a new car or holiday, they may need to make home improvements or they may want to consolidate credit or store card debt. These are all sensible reasons to take out a loan, unfortunately though some people are not so sensible with loans.
Some choose to use short term loans like payday loans to fund spending splurges, unnecessary luxury items or even addictions like online gambling. This can put your finances in danger both in the short term and long term. Throughout this article I’m, going to discuss how an instalment loan can be used to benefit you and your personal finances.
1. Consolidating Short Term Credit
The use of short term credit like payday loans has increased greatly over the past few years. Unfortunately though, due to the interest rates and the nature of the repayments many have found themselves getting into trouble.
In this situation, taking out an instalment loan can be beneficial to your overall financial outlook. By consolidating the outstanding balance(s) into one monthly repayment you’ll not only find that your finances are more organised but you’ll save yourself money in the form of rollover fees and late payment charges.
2. Buying a new car
If your car is getting old and is proving a continuous source of problems then using your money to fix it could be counterproductive in the long run. Rather than spending more and more money repairing it, you could choose to scrap it or sell it and then use an instalment loan to purchase a new one.
By using an instalment loan to help fund the purchase of a new car you could save yourself significant amounts of money in the long run. By buying a newer, more reliable vehicle you’ll find yourself spending considerably less on maintenance. Also, by purchasing a vehicle with a more efficient engine, you may be able to save yourself significant amounts on petrol.
3. Make home improvements
Much like the car analogy, using instalment loans to make home improvements may be a good move for you in the long run. Continuously patching up your house with short term fixes has no longevity and just means that you’ll be doing the same thing all over again in 6 months’ time.
By taking out an instalment loan you can either pay for an expert to carry out the improvement or you can spend more money on better quality goods and do it yourself. Either way spending a little more in the short-term could save you significant amounts in the long term.
The great thing about instalment loans is that you are able to stipulate the loan term and amount to find repayments that fit your budget. Depending on the amount you borrow, lenders will allow you to spread the repayments over a term of 1 to 24 months and some may even offer the opportunity to pay the loan back early.