Main Pros and Cons of Personal Loans
Pros and Cons of Personal Loans
Should you take personal loans? It depends on your situation. If you have assets such as property or gold, you could take a loan with your assets since the loans would offer lower interest rates. But, if you have an urgent need for cash and do not have any assets, a personal loan is surely advisable. This loan would be cheaper than cash withdrawal with your credit card when you need to cover the cost of your car repair, pay down your holiday debt, or pay your wedding party. This loan will be fast source of cash. It typically does not offer high-interest rates like a credit card. It can be the affordable way that you are looking for. Now, it becomes very fast-growing finance option and continues to rise. The consumers are very like this financing option.
Using this kind of loan, you could borrow a certain amount of money in a certain period of time. You should pay the loan back in regular installments each month. Sometimes, the loan is unsecured. Unsecured loan means that you should not put up the collateral, like a car or house. The rate is based on your credit score and credit history. You can find personal loans at credit unions and traditional banks. You also can find them at several online banks (for example Discover), peer-to-peer lenders (for example Lending Club) and online non–bank lenders (for example SoFi). You should not accept the first offer that you get from the banks, credit unions or online lenders. You should shop around to get the best choice. Certainly, you want to get the best rates’ offer. You can check the recent rates of the loan at Bankrate.com.
There are some of the pros and cons if you are taking out personal loans. By learning the pros and cons, you could decide the way that you need. Before talking about the cons, I will show you the pros. A personal loan could be a good method to combine your existing debt, like credit card. You will be effectively refinancing. You could lower the interest rate and monthly payment. The loan is also not complicated to apply for if compared with a home equity line credit or mortgage. Certainly, you want to get easy process to get the loan. Your financial situation may make you depressed. So, the easy process can make you easy to breathe. You will also get quick decision from the insurer when you are approved. When you are approved, the money will be in your bank account in a few days. You do not need to wait too long. You can quickly get the money and cover your needs. The other benefit is you will set certain amount for specific period. There is clear beginning and ending. You can prepare the budget as required without doubt. In each month, you should pay the same payment. You do not need to worry about the expansion payment. You can also know the rest of the payment period. According to a report, the average rate of a 2-year personal loan was 9.7 percent, as the average rate of a credit card that was taxed with interest was 13.7 percent. The average rate could be 6 percent up to 7 percent for the most creditworthy customers. If you need to pay down a number of credit cards, you probably could roll all bills into a personal loan, and you just need to pay one monthly payment.
Now, we will talk about the cons of personal loans. If you want to use the loan for consolidating your existing debt, remember that you are only transferring the loan from one type to another. You are not paying off the debt. When you are transferring the credit card bill to your personal loan, your credit card might be charged new debt. A loan might provide you a chance to dig yourself out of a hole. But, you should also remember that it could also make a bigger hole. You should be careful when taking an action. Sometimes, a personal loan carries high-interest rates. It is very important for you to read the fine print. You should exactly understand the terms of the loan that you are taking into consideration.