A very famous American quote goes like this – “Before borrowing money from a friend, decide which you need most.” Rightly said, as many people do not think much about the repercussions but straight away borrow money from their friends and family whenever in crises. They do this because of various reasons of which convenience and lack of knowledge about other options are the chart-toppers. People believe that borrowing from friends is the promptest way and that there are hardly any other choices in the market. Besides making them feel obligated, borrowing from known people leaves little scope for repaying in small chunks of money.
Some of the individuals might also turn to various money lenders who levy gigantic interest rates owing to the urgency they see people are in. In both cases, a lack of information and misjudgment can leave individuals in a very difficult situation. It’s time people get informed of smart and efficient ways to manage their debts. People need to realize that various other organized institutions can provide them with these funds in a couple of minutes without any discomfort or stress.
One of the most dependable ways to repay debts would be to apply for a personal loan from a bank or a credit union. Not only is this a hassle-free process but it also saves individuals from a bitter relationship with their close friends and family members.
Here are 4 economically intelligent reasons for paying off their debts if they apply for personal loan:
1. No Obligations or Awkwardness- Andrew Jackson once said, “When you get in debt you become a slave.” This is totally fit when it comes to borrowing money from family members or friends. Being indebted to a close friend or a family member and not being able to repay the amount in time may put individuals in a rather uncomfortable position. Financial matters might also affect their personal relationships. Here applying for a personal loan comes to their rescue as this type of loan help individuals in a smart way by enabling them to repay in easy monthly installments and that too without running into any obligations. In most cases, banks allow a tenure of 1 year to 5 years to repay a loan
2. Easy EMIs options- When a person borrows from a friend or a family member, repayment in lumpsum seems the only option as repaying in small bits might not be well accepted to the lender. This in itself, becomes a challenging job. However, applying for personal loans is one of the best ways provided by banks in this regard as well. Repayment of personal loans can be done in affordable monthly installments. One can choose the number of monthly installments one can afford to pay. It is very crucial to select the right mix of tenure and EMI amount as shorter the tenure, larger the installments. Individuals should choose a combination that is best suited as per their finances
3. Lower interest rates – Many individuals nowadays use credit cards for their day to day purchases. Sometimes they also start revolving cards i.e. financing from one card to repay the debt of another. This is not a financially intelligent practice as interest rates on credit cards are much higher than those on personal loans. Although interest rates on personal loans are the highest out of all other types of loans, some banks provide the options of fixed interest rates and floating interest rates. One can opt for an interest rate which is lower than one’s current rate of repayment. A good credit score may enable one to get a suitable interest rate that can significantly reduce the interest amount to be paid to clear the dues
4. Settle Credit Card Debt – With the advent of digitization, most individuals use plastic money for all their big and small purchases. Some people tend to live a lavish and carefree lifestyle which is highly dependent on these credit cards. However, this mode of credit is a rather expensive one which may take a toll on their finances if not used carefully. Many a time one loses track of one’s expenses while using a credit card. Not paying attention to this accumulated debt and later being unable to repay it invites huge penalties from banks and credit unions. Using multiple credit cards in the rotation is a bad move since credit cards incur a higher rate of interest. In such dreadful cases, one can opt for a balance transfer. This consolidates all their debts from multiple credit cards into a single loan, and at a lower interest. One can choose the repayment tenure, ranging from 1 year to 5 years in most cases, and repay the dues in equal monthly installments.
Apart from the benefits mentioned above, applying for a personal loan is also very quick and hassle-free. Anybody can apply for a personal loan online from their home. It does not require numerous identity or verification documents and is security free. Besides this, it also provides for flexible interest rates if one has a decent credit score. All of these benefits, with a lot more, make personal loans one of the most immeasurable features provided by the banks. Besides providing a large number of loans without any questions asked, it also offers easy and flexible repayment options, thus giving borrowers a stress-free money financing experience.