Many people struggle with living paycheck to paycheck; not only is it stressful, but it doesn’t allow any room for unexpected bills of emergency costs. A car breakdown or hospital bill might not be able to wait until your next paycheck. A low interest rate loan can be a way to offset the immediate need for funds, without jeopardizing your finances.
Why Low Interest Rate Loans Are a Good Idea
When it comes to finances, you may end up between a rock and a hard place. Having debt or owing a lender can be unsettling, but sometimes a loan is the only solution. Often, the short-term cost of a loan far outweighs not being able to cover a necessary expense.
That’s not to say that people should make a habit of living off borrowed funds. Many quick cash loans come with high interest rates and very strict lending terms. In the rush to get the necessary funds, many people fail to compare rates and find quick personal loans with low interest options. Being smart about which lender you choose is an important step in making sure a short-term loan is right for you. Here are a variety of situations where a low interest loan may be a smart move to make.
1. Debt Consolidation
Multiple debt accounts can be stressful to manage between varying due dates and multiple interest charges. Owing money on multiple accounts means separate interest rates and charges that accrue as you work to pay off each creditor. Debt consolidation through a low interest rate loan reduces stress of varying due dates and helps reduce overall costs.
In this setup, you apply for a personal loan equal to the total amount of all your debt accounts. When approved, you use the funds to pay off each account in full. A singular monthly payment is set up, that is often more reasonable than all of your individual accounts combined. This strategy can help get your debt back on track, while allowing a little extra financial support each month. It is important however, to ensure that the consolidation loan’s interest rate is lower than the average rate of all existing payments. If it is not lower, the consolidation loan will not be beneficial for you.
2. Emergency Expenses
There may come a time when you don’t have the money on hand to take care of an emergency; and some emergency expenses can’t wait. Emergency home repairs are necessary for the health and safety of yourself and any loved ones. A leaky roof in the winter, or a broken air conditioner in the summer can’t necessarily be put off. If you rely on your car for work you may risk losing your job if you can’t get it repaired. Unpaid medical bills can be sent to collections, where the negative impact on your credit may follow you for years. As a solution, low interest loans don’t have restrictions on use, allowing the funds to go toward your priority needs.
3. Income Potential
You may find that you need to spend money in order to make money; especially if you are running your own business. Small business loans often have strict application and approval requirements, making it difficult for new owners to get the cash they need for expansion or investment in additional inventory. Home repairs, when contributing to the overall value of your home, are also considered expenses that have the potential to bring greater profits.
The decision of borrowing money in the hopes of making money should not be made lightly. The risk of this strategy is that any failure leaves you saddled with extra debt. This decision needs to be made carefully, and by evaluating your entire financial situation before tying up your cash in a loan payment.
What It Takes to Get a Loan
Depending on your choice of lender, you will be required to fill out an application and establish your ability to repay the loan. Traditional banks and credit unions look at the borrower’s credit score and history to establish creditworthiness. Quick cash loans have more lenient approval criteria, often putting greater emphasis on income and your debt-to-income ratio for evaluating the risk in lending to you.
Where You Should Look for Lowest Interest Rate Loans
With so many loan options to choose from, you could spend hours browsing different lenders and looking up terms and conditions. But an application through LoanConnect does the browsing for you. Fill out an application and see why thousands of Canadians use LoanConnect to find a lender for auto financing, debt relief, mortgage refinancing and more.