Different things you can do with a personal loan

Since the beginning of the 20th century, the demand for loans has experienced rapid growth year after year. The increase in lenders in the market is a big contributor to this growth. Today’s customer is smart and the advancement in the digital industry has helped the average customer to be well-informed and informed.

Before making use of a personal loan, the client would go to the lender with the lowest interest rate. Today, the scenario has changed drastically. Banks entertain customers who have good credit scores and give them better deals and offers on the loans they take out. Therefore, an individual would need to always keep his financial profile strong.

How does a personal loan fit into this equation?

A personal loan is taken out by an individual to meet short-term obligations that require his immediate attention. You can also make use of this loan for any medical or general emergency. Tuition fees, credit card bills, buying an expensive gadget, traveling to new places, etc. These are the different things you can do with a personal loan. But, there is one more use for this loan and that use is to strengthen your financial profile.

Yes, you can improve your credit score and therefore strengthen your financial profile by taking advantage of a personal loan and paying it on time without any default. Let’s take a hypothetical example;

Johnny Kane is a married man who lives with his wife and son in a rented apartment. He wants to buy an apartment of his own in a couple of years that will be close to the boy’s school and his workplace. As he searches for possible home loans from different lenders, he realizes that just because his credit score is low, he is getting a higher rate home loan. Johnny then decides to do something about it.

You find out that your credit score is weak and therefore no bank can guarantee your credibility. So if you want a lower interest rate on any loan, you’ll need to improve your credit score. Johnny requests a personal loan with a bank for a period of 2 years. The interest rate is high and the loan amount is Rs 1,00,000. Johnny realized that the benefits of repaying this loan with no defaults will improve his credit score. He repays the loan with no defaults. A couple of years later, when he applies for a home loan, he gets a better interest rate than before just because his credit score has now improved and his financial profile is solid.

This is how you can use a personal loan to improve your financial profile. Banks offer their best deals and offers to customers who have a good credit score, as it shows their ability to repay the loan without the possibility of default.