Many people struggle with living paycheck to paycheck, a situation that can turn into a financial tragedy if an unexpected bill or emergency comes up. You may not be able to wait until the next pay period to get new tires for your vehicle or pay that extra high utility bill. Low interest loans 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 in a situation that puts you between a rock and a hard place. It can be unsettling to have debt or to owe money to a lender, but there are times when taking a loan is the only way to make it through your current struggle. For many of these tough choices, the short-term costs of taking a loan are far less worrisome than the results of being foreclosed on, missing work because of a broken engine or failing to take important medications for lack of money. The pros outweigh the cons.
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 access to much-needed money, many people fail to compare rates between lenders and look for quick personal loans with low interest options. Being smart about which lender you work with 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. In addition to trying to remember the due dates for the different accounts, you also have to factor in the separate interest rates and the charges that continue to accrue as you work to pay each creditor. Some of these headaches, and the long-term costs of keeping these multiple accounts open, can be alleviated with debt consolidation through a low interest rate loan.
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. You are then left with one monthly payment that is often more reasonable than the total of all the other accounts combined. This is a way to get back on track if the debt had been making it harder to survive between paychecks. Make sure that your interest rate for the consolidation loan is lower than the average of the other rates if you want to save money.
2. Emergency Expenses
There may come a time when you don’t have the money on hand to take care of an emergency. Car repairs are a necessity, as you need your car to get to work and earn your living. Home repairs are a necessity because of the health and safety impact a leaking roof or broken air conditioning unit could have on your family. Medical bills that aren’t paid can be sent to collections, where the negative impact on your credit rating may follow you around for years. 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 to expand or invest in additional inventory. Home repairs are also considered expenses that have the potential to bring greater profits, particularly in areas that contribute to the value of the home.
There is some risk involved with borrowing money with the hope that you will be able to make money, as any failure leaves you saddled with extra debt. This decision needs to be made very carefully, and your whole financial situation should be evaluated 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. LoanConnect helps thousands of Canadians search through dozens of lenders to find which one is best suited to their financial needs. Fill out an application for help finding a lender for auto financing, debt relief, mortgage refinancing and more.
