Similar to the advice that you need to follow, there are some common advice myths that you should avoid. Every piece of advice you receive from friends, family, and known ones are either bad or inaccurate. You need to stop believing unless you are sure about the advice. Especially when it comes to your personal finances or personal loans, you need to stop believing these common tips:
You can carry monthly balances on your credit cards
You often get advice regarding your personal finances from your friends and family. It is very common advice that you can carry monthly balances on your credit cards. However, this is a common myth and one should not believe it. If you follow this myth, you will end up losing thousands over the years. If you end up carrying a monthly balance on your credit card, it becomes very expensive. This means you are keeping an outstanding or overdue amount on your credit card. Cardholders have two options: full bill payment or minimum balance. If you do not make the full bill payment, there will be an outstanding balance on your credit card. This will not only make your loan more expensive with additional charges but also damage your credit score. If you are trying to improve your credit score, you must never carry the balance from month to month. That is the worst thing you can do. This is why you should always spend what you are able to pay.
Your credit score is affected by loans you take out
This is the second personal finance advice that you need to stop taking, even if it comes from a dear friend or family member. You need to make sure that you do not believe this. Taking out loans does not harm your credit score. Rather, if you keep taking different kinds of loans, you will actually have a good credit mix. A good credit mix always helps in improving your credit score. It is important that you balance your credit profile with multiple credit types like credit cards, home loans, auto loans, and student loans. This is why some people choose not to pay off their loans. This is the same reason why credit card debt is bad. You end up paying more interest over the long term than if you had paid your loan on time.
Cancel any credit cards that are no longer in use
This is the worst mistake you can make for your credit score. It is very important that you keep your credit cards open. Yes, even when you do not use your credit cards, you need to keep them open. Any credit account with a credit history needs to be active on your credit profile so that you are able to get a good credit score. A credit account with a long credit history will always help in improving your credit score. If you have a credit card that has a smooth repayment history and a clean track record, you need to keep it open. The longer the credit age, the better it will be for your credit score. Do not close the credit card or cancel it. New credit does not add to or improve your credit score, but a credit card with a long credit history always improves your credit score.
Take a loan when you need one
You will always find advice to take an instant personal loan online when you need anything. Yes, borrowing has become a handy solution. However, this is not a good habit or advice that you can take for your personal finances. You need to stop taking loans when the need is not an emergency. A loan is always a financial burden. When you take a personal loan, you always need to pay a rate of interest for every amount that is included in the loan principal amount. You need to pay an EMI every month, which becomes a fixed obligation for you. Therefore, when you are in an emergency, only then do you need to take a loan when all other ways seem to end.
The only way to save it is by cutting down on expenses
You will always find this advice from friends and family. If you want to save money, you need to cut down on expenses. However, this is not at all true. You can go for other ways that can actually help you save. It can be any kind of investment that helps you save and grow your wealth over time as well. Cutting down on expenses that are important will not be a wise decision. You can opt for other ways where you can save a small amount, and then you can enjoy the benefits of that investment.
Wrapping up
It is true that an instant personal loan online is very helpful, but one should not make it a habit. It is important to use a personal EMI loan calculator so that you choose the most affordable loan.
