Back To All Educational Articles

Leverage Your Personal Loan

Our team at Legacy Bank discusses how to leverage a personal loan to improve your finances!

 

Leverage Your Loan: How a Personal Loan Can Improve Your Finances

If the idea of taking out a personal loan sounds intimidating, you’re not alone. For many people, the thought of borrowing money feels like a step in the wrong direction. But the truth is, when used the right way, a personal loan can help you get ahead financially! Whether you’re trying to simplify your payments, consolidate debt, or invest in your future, a personal loan could be the solution to your financial woes. Our team at Legacy Bank has many personal loan options to meet our customer’s individual needs and is breaking down how you can leverage personal loans to improve your finances!

 

What Is a Personal Loan?

A personal loan is like borrowing a lump sum of money that you agree to pay back over time, usually with a fixed interest rate. Unlike car loans or mortgages, personal loans aren’t tied to a specific purpose, so you can use the money for almost anything—whether it’s paying off debt, upgrading your home, or covering unexpected medical expenses. Because personal loans are unsecured, you don’t need to put up collateral (like your car or house). Instead, lenders look at factors like your credit score and income to decide how much you can borrow and at what rate.

View Legacy Bank’s personal loan rates and apply online!

 

Consolidate Your Debt

Are credit card payments and high-interest loans weighing you down? A personal loan can simplify things by combining all your debts into one loan with a single monthly payment. Even better, personal loans often have lower interest rates than credit cards, meaning you’ll save money in the long run. In fact, the current average personal loan interest rate is 12.31 percent, a significant difference from the current average credit card interest rate of 20.42 percent!

 

Boost Your Credit Score

Did you know a personal loan can actually help improve your credit score? This happens in two main ways: lowering your credit utilization and diversifying your credit mix.

  1. Credit utilization refers to the ratio of your available credit to your current debt; by paying off high credit card balances with a personal loan, your credit utilization decreases, positively impacting your score (remember, lower utilization = a happier credit score)!
  2. In addition to decreasing your credit utilization, a personal loan adds to your credit mix, which accounts for about 10% of your credit score. Lenders like to see that you can handle different types of credit, like loans and credit cards, and this added diversity can give your score an added boost.

 

Save on Monthly Payments

If you’re currently managing several small, high-interest loans or credit cards, the combined monthly payments can take a significant chunk of your budget. Refinancing with a personal loan can lower your monthly payments, giving you more breathing room in your budget. For instance, if you’re paying hundreds of dollars across multiple bills each month, consolidating into one lower-interest loan can shrink that total and help you avoid falling behind on payments. While this is a short-term benefit, reducing monthly expenses can provide immediate relief and allow you to get back on track with your financial goals!

 

Embrace Flexibility in Your Loan Use

Unlike auto loans or mortgages, which are earmarked for specific purchases, you can use the funds from a personal loan for almost anything. Whether consolidating debt, financing a wedding, or taking a dream vacation, the decision is yours. This flexibility can provide you with the capital to move forward with your long-term goals and set yourself up for financial success in the future.

Let’s See an Example! A homeowner takes out a personal loan to make home improvements. The improvements help increase the home’s value, giving the customer more equity and a higher resale value.

Contact or Visit Legacy Bank Today!

Legacy Bank is committed to providing the best customer service to meet your banking needs.

Explore Personal Loan Options