Different Uses of a Personal Loan – What Are They?
Different Uses of a Personal Loan- This increase has revealed the different uses of personal loan. The increase in the number of lenders in the market contributes enormously to this growth.
Today, the customer is smart and advances in the digital industry have helped the average customer to be well read and informed.
Earlier to qualify for a personal loan, the customer would run to the lender with the lowest interest rate. Today, the scenario has radically changed. Banks entertain customers with good credit scores and offer them better deals and deals on the loans they take out. Therefore, a person should always keep their solid financial profile.
How does a personal loan fit into this equation?
A personal loan is taken out by an individual to fulfill short-term obligations that require immediate attention. You can also avail this loan for any medical or general emergency. Tuition, credit card bills, purchase of an expensive gadget, travel to new places, etc.
These are the different uses of personal loan. But, there is another use for this loan and this use is to strengthen your financial profile. Yes, you can improve your credit score and thus strengthen your financial profile by taking advantage of a personal loan and paying it off on time without any defaults. Take a hypothetical example;
Johnny Kane is a married man who lives with his wife and child in a rented apartment. He wants to buy his own apartment in a few years which will be close to the children’s school and his workplace. While he checks possible home loans from different lenders, he realizes that it is only because his credit score is low that he obtains a home loan at a higher rate. Johnny then decides to do something.
He discovers that his credit rating is low and that no bank can guarantee his credibility. Therefore, if he wants a lower interest rate on any loan, he will have to improve his credit score. Johnny requests a personal loan from a bank for a period of 2 years. The interest rate is high and the loan amount is 1,000,000 rupees. Johnny realized that the benefits of paying off this loan without any defect would improve his credit rating.
He repays the loan without any default. A few years later, when he applies for a home loan, he gets a better interest rate than before only because his credit score has improved and his financial profile is solid .
This is how you can use a personal loan to improve your financial profile. Banks offer their best deals and deals to customers who have a good credit rating, as this enhances your ability to repay the loan without any possibility of default.