5 Ways Monthly Payment Loans Can Benefit You

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Personal loans are an increasingly popular type of financing. Most people are familiar with more common financing methods such as car loans and mortgages.

But personal loans are the fastest-growing method for consumer lending. And that is despite the fact that they only made up about 1 percent of the total outstanding consumer balance in the first quarter.

Read on, and we’ll walk you through the ways monthly payment loans can help you.

Fix Your Credit Score

Monthly payment loans can add to your “credit mix“. Ten percent of your credit score is based on this “mix” which is made up of the different kinds of credit you have.

Adding a new line of credit can benefit your score in the long run. But be aware that it can hurt your score in the short term. Whenever you apply for a loan, the “recent inquiry” can lead to your score dropping by a few points in the beginning.

Consolidate Several Debts

Having to separately pay off multiple lines of credit can be a frustrating task. You can easily become overwhelmed and accidentally miss a payment. This will lead to penalties and more payments.

An easy solution is to pay off multiple debts with a personal loan. This way you only have to worry about making one monthly payment on that loan instead of several loans throughout the month.

Use the Money How You Want

Unlike more standard modes of financing like car loans and mortgages, what you choose to do with your personal loan is up to you. You can use to fund a wedding, vacation, or other special endeavors.

And if you have a good enough credit score, you can usually get a personal loan for a much lower interest rate than with a credit card. And even achieving a slightly lower interest rate will save you greatly in the long run.

Borrow Money Without Risking Assets

A major benefit of receiving personal loans is that collateral isn’t required. These loans are known as unsecured. This means that you can take out a loan without having to attach it to your car, house, or other assets.

But just because your loan isn’t attached to any assets doesn’t mean that you won’t face serious consequences for not paying off the loan. Your lender can still collect from you. They can also report your missed payments to your credit bureau and even take legal action and go after your assets.

Refinance Your Debt

If you are paying a high-interest rate on your debt, then monthly payment loans can be a great help. By accepting a loan with a lower interest rate, you can effectively pay off the original debt and replace it with one that has a lower rate.

By paying off a debt with a lower interest rate, you will be able to get out of debt quicker than with the original interest rate.

Are Monthly Payment Loans Right For You?

Take a look at the above situations and consider if monthly payment loans are a good option for you. Remember that you will still have to make payments but you could be doing so at better rates and have an easier time doing it.

Looking for more financial advice? Check out our blog today!