5 Ways To Reduce The Cost Of Personal Loans

Personal loans are flexible by nature. Just like payday loans, you can utilize them to fulfill almost all sorts of personal needs. Moreover, the criteria for obtaining a personal loan are not as rigid as some of the other traditional loans. This is precisely why many people consider it as one of their go-to options whenever their graph declines financially.

Having said that, there is no dearth of borrowers who find it hard to repay their personal loans. The primary reason behind this is that things didn’t go as they might have planned. The fluctuation in their financial standing became the biggest barrier in the repayment process. If you happen to undergo the same dilemma, guess what, all is not lost. There are certain ways that can be very helpful to reduce the costs of your personal loan and thereby making the repayment process much less problematic. 

All such methods are comprehensively listed below:

1.   Use savings to repay the loan

People save money for various reasons. Depending on their income, they put aside some proportion of it either for rainy days or fulfilling future needs. If you have any such savings deposit, it’s time to make the most of it. It goes without saying that dragging your personal loan will make you liable to pay more interest over the period of time, which is why considering options like caravan finance when you are considering a camper trailer or caravan can be very beneficial. You can cut the time period by making larger payments. In other words, shorter deals are less expensive.

More often than not, lenders are willing to renegotiate the loan terms. For example, if the initial contract entitled you to pay the loan in 3 years, you can reduce it to 1 year or even less during the re-negotiation process. But before throwing your weight completely behind this option, make sure you have enough savings.

As we know, life could be very unpredictable and you may have other emergencies to face in the future. To be on the safe side, don’t drain yourself from all the savings. You can use a loan calculator for a better idea and then decide whether it is a viable alternative or not.  

2. Consider taking another loan

Well, if you had to content yourself with high rates in the past, there could be many reasons behind that. It could be because you had poor credit score or you simply didn’t go through enough heal dragging of shopping around. As a well-documented figure goes, borrowers can save up to 3000 dollars by getting five or more quotes from lenders.

In all likelihood, the personal loan might have changed your financial position and perhaps now you have better understating of the loan market as well. Given these two advantages, you should shop around and apply for another loan with cheaper rates and use it to pay off the personal loan.

The lending industry has become competitive and lenders are offering loans on easy terms to keep up with the competition. What’s more, technology has made it easier for you to compare the rates. You don’t have to take appointments and meet the lender in person anymore. So all you have to do is to go online and get hooked up to a lender who is offering economical rates. Use a service like FatCat Loans that will give you an instant approval decision on your application and a lender who will give you a fast payment of your loan.

3. Tab into debt consolidation loans

If you have multiple loans that are making it tough for you to pay off your personal loan then a debt consolidation loan could be your cup of tea. By obtaining a debt consolidation loan, you can merge all your loans into one. This option is particularly more appealing due to the fact that it comes with low rates and low payments. 

At the same time, you have to be very cautious before signing up for debt consolidation loans. The lenders require borrowers to keep their house as collateral so that they can cover their amount in case of default. Therefore, the consideration of a debt consolidation loan is only worth it if you have a long term repayment plan. Provided the risk of losing one’s house or another suchlike asset, many financial advisors recommend debt consolidation when it is the last remaining option for a borrower.   

4.   Exploit credit cards opportunities

A credit card can offer you a balance transfer with zero percent interest. It means you will be able to draw a certain amount until a certain period without being liable to any interest rate whatsoever. You can use this interest-free money to pay off personal loans immediately.

Before you make your mind, this option comes with some potential problems as well. For example, if you fail to repay the credit card debt within the defined time span, you will be obliged to pay higher interest rates. Apart from that, there could be hidden fees under the guise of annual or transfer charges. It also helps that you have an idea of how long does it take for a balance transfer to take place for different credit card companies.

 Now that you are aware of the pros and cons of credit card balance transfers, you can decide the feasibility of this alternative. 

5. Use extra payments 

 One of the most effective ways to minimize the time duration of the personal loan is to make an extra payment. As we have already mentioned, repaying the personal loan at the earliest will greatly reduce overall costs.

However, you can’t take this measure on your own. You need to take the lender into confidence. Typically, you will have to send a notice to the lender at least 28 days before you make your first extra payment.

Some lenders include various conditions in the contract for the overpayment. So make sure you have read the terms and conditions thoroughly.  If you have any confusion regarding the interpretation of terms and conditions, don’t budge away from asking questions. A small confusion could easily spoil your game plan.

Conclusion

As you can see, there are multiple ways to get away with heavy costs on personal loans. You just have to assess your financial footing and then apply any of the above approaches. It is advisable that instead of looking for short term benefits, adopt a strategy which is durable in the long run.