Taking out a loan in order to save for the future might seem counterintuitive. However, this strategy could be highly beneficial for you, whether you’re focused on strengthening your personal financial standing or ensuring the success of your business or career. Beyond just helping you navigate the current economic circumstances today, a loan can also prepare you for what’s to come tomorrow. Here’s how:
1. Increase Your Savings
With a fixed rate loan, you can consolidate multiple debts into one simple payment each month. Not only does this reduce the stress of juggling different payment dates and amounts, it eliminates the risk of missing a payment and being hit with costly late fees. By working with a financial partner who can help you find a loan with a longer term, your monthly payment could be lower than a loan of the same amount with a shorter term. This means that even while you’re paying down your total debt, you have more cash in your pocket each month to put towards increasing cash flow, investing or having a reserve for unexpected expenses.
2. Improve Your Credit Score
Paying off revolving debt with a loan doesn’t just consolidate multiple payments, it can also improve your overall financial profile. Your credit score is calculated using several metrics, one of which is credit utilization. This is determined by dividing the total amount of revolving debt you’re using (or “utilizing”) by your total credit limit. The smaller this ratio is, the better, with most credit bureaus advising you keep it around 30% or less. Strengthening your credit score–and your overall financial profile–can help keep you in an advantageous financial position.
3. Make New Investments
By taking out a loan, you can drastically improve your cash flow, giving you the opportunity to make investments that will increase your overall net worth, like renovations to your home or business. These kinds of improvements can exponentially increase value, and result in even greater financial benefits for you in the future should you sell or refinance.
Whether you’re planning for your family’s future, working toward professional goals or both, BHG can help you find the financial solution you need. Learn more by calling 866.297.4664.