Most American families (77% of households) carry some type of debt, with the average amount of debt per U.S. adult landing at $58,604.
So why not start off 2022 by making smarter financial choices with the help of a personal loan?
Let’s take a look at four ways you can use a personal loan to improve your financial situation in 2022.
1. Consolidate Credit Card Debt
Personal loans are often a smart way to consolidate your other debt because they have relatively low-interest rates, variable repayment terms, and are generally more flexible than other kinds of debt.
Personal loans tend to have much lower interest rates than credit cards. So if you have one or two (or seven) credit cards burning proverbial holes in your wallet, taking out a personal loan to pay your credit card debt might make good financial sense.
But before taking out a personal loan to consolidate credit card debt, you should double-check the personal loan terms, as some unscrupulous lenders charge exorbitant interest rates. Also, be sure to check your credit score, as individuals with lower credit scores will likely be charged a higher interest rate. So this strategy for debt consolidation may only make sense for those with average-to-high credit scores.
The bottom line is, if you’re approved for a personal loan that carries a lower interest rate than that of your credit cards, you will add dollars to your pocket every month.
2. Finance The Big Moments In Life
We can all be more careful with our money, but that shouldn’t mean missing out on the memorable moments in our lives. Weddings, overseas vacations, buying your kid their first car – these are all magical and memorable moments in a person’s life that often require a large amount of cash.
So, if your assets aren’t liquid, a personal loan can be a relatively low-interest, practical way to finance these large purchases. As long as you’re comfortable with the repayment amounts, you shouldn’t feel bad about making your dreams – or the dreams of your loved ones – come true!
3. Raise Your Credit Score
Taking out a personal loan and paying it off is better for your credit score than maxing out your credit cards each month.
Since personal loans require you to determine a fixed rate of repayment and a time period within which you’re obligated to repay the full sum of the loan, you avoid constantly swiping a credit card and reaching your limits.
Thus, using a personal loan to pay off credit card debt not only saves you money, it also improves your credit rating, boosting your ability to get approved for credit in the future.
4. Improve Yourself
One of the best uses of a personal loan is furthering your education. Education can benefit you financially in a number of ways – whether that means earning a master’s degree to place you in a higher salary bracket or learning the skills you need to start that side hustle that’s been on your mind.
That said, increasing your knowledge in the world doesn’t have to be about making money. Many courses offer opportunities for self-improvement, elevating various skills from parenting to communication. You might even take a painting or pottery class, learning a new hobby that makes you happy.
No matter your financial situation, there is always room for improvement. And for many, a personal loan can be a step on the path to financial freedom.