Managing personal finances requires a careful balance of income, debt repayment and setting goals.
Although the ultimate goal for any financial plan is getting out of debt and building up a healthy retirement, using debt as a financial tool can still be used during the planning process.
Using Loans to Repay High Interest Debts
Financial planning should always focus on paying off the highest interest rate debts due to the possible damage to the ability to save money.
A high interest credit card is better repaid with a personal loan to reduce the interest rate and help create a four to five year repayment plan.
According to Annamaria Andriotis on SmartMoney.com, personal loans can have interest rates that start as low as 9 percent.
That reasonable rate is often fixed and has a set repayment amount each month. By replacing a 20 percent interest credit card with a 9 percent interest personal loan, the savings will add up and the debt ratio reduces at a faster rate.
A personal loan from Clydesdale Bank can be used as a financial tool during the planning process to help reduce debt and cause a faster repayment.
Since the loan is usually a four or five year debt, the full amount is repaid within a short period of time, which allows the borrower to get the financial situation under control.
Improving Credit Ratings
Financial planning is not only about repaying the debts and building up savings or investments. It also focuses on making improvements to credit ratings.
A good credit score is a vital part of obtaining fair interest rates on mortgages, car loans and other necessary debts. A personal loan is sometimes used as a tool to get funding and build up credit.
According to CliftonCPA.com, a personal loan allows a borrower to take out funds with a poor credit history. When the loan is repaid properly and the funds are used to help reduce interest charges, it is possible to build up credit scores while improving the financial situation.
Improving credit ratings will ultimately have a positive impact on the ability to save or invest more money in a retirement account.
Financial planning is a tool that makes it possible to reach financial goals. With careful management, a personal loan is a great tool to get the financial plan on track and avoid costly debt mistakes. By using the loan wisely and taking measures to improve the situation, it is possible to get the financial situation under personal control.