Personal loans are typically used to finance expenses when finances are tight. They are a great solution if someone’s in a financial pinch and needs to pay off large expenses like medical bills or home repairs. But something that’s not talked about a lot is that personal loans can help you increase your money. Personal loans, debt consolidation loans to be more specific, can be used to pay off all your high-interest debts. The funds can also be used for good investments or finance repairs or renovations that would increase the value of a property or vehicle you are about to sell.
Questions surround these methods and so does misinformation. One of the most glaring questions is are personal loans taxable? The straightforward answer is no, personal loans aren’t taxable as they aren’t considered part of your income. But how can you use them in the most legitimate way to build your finances? We have covered all the important bases so you can get accurate information in one place.
Personal loans for debt consolidation
If you are struggling with multiple high-interest debts such as credit card debts, then taking out a personal loan to consolidate all your debt could be a great option to help your finances. Personal loans usually have a lower interest rate as compared to credit cards and the interest rate is fixed. So, market fluctuations won’t affect your interest rate—something that credit card lenders can’t offer.
If you consolidate multiple credit cards into one loan with a fixed interest rate and a repayment deadline, you would be able to pay off your debt faster and save money on the high-interest rate you would have otherwise paid on multiple credits.
Personal loans for investments
Contrary to popular belief, you can use personal loans for investments. The funds from a personal loan can be used to pay for courses or certifications that enhance your resume—increasing your income. But they can also be used for stock market investments. Personal loans come with interest rates as low as 4.6%, depending on the lender. But for you to be offered his interest rate, you would need to have a great credit score and a stable monthly income. And in case of high interest rates, you will generate less earnings which defeats the purpose of the loan.
Financing home repairs
Another way personal loans can help you increase your money is repairs and renovations. Repairing or renovating a property, whether your primary home or a rental, can increase the value of a property. If you are planning to rent a property or sell it, renovations or repairs can increase the value of the property drastically.
Similar to other kinds of personal loans, home improvement loans have fixed interest rates and a predetermined repayment term. Moreover, some lenders even offer repayment terms of up to 140 months on home repair loans, which would give you a lot of flexibility, especially if the repairs are major. But you should have a good credit score for home improvement loans to be worth your effort.
Conclusion
Though it may not be an ideal solution for everyone, personal loans can help you build wealth by providing funds to take advantage of opportunities that you would otherwise miss out on due to lack of money. To determine whether a personal loan would be good for you to increase your finances, make sure to analyze your financial situation from every angle possible thoroughly and calculate how you can fit the repayments into your monthly budget. If you are having trouble with the investments, you can always ask a professional to evaluate your investment plans to understand whether something is worth the risk. We hope this clears up your doubts about how you can use personal loans to increase your finances.
