Personal Loans

Everyone needs to borrow money at some point in their lives. Some methods include using your home or other property as collateral, and some loans available have to be used in a very specific way or by a certain time period. However, there is money available that can be borrowed without collateral, without any specification on what you spend it on, and no time limit by which you must spend it. These are called Personal Loans, and can be used on anything from making home repairs to taking that dream vacation you’ve always wanted but couldn’t afford.

Overall, people’s perceptions of personal loans tend to be mixed. Those who use them responsibly, think of them as an effective method of achieving goals they normally wouldn’t be able to without a loan. Others, however, are quick to point out that there are some considerable downsides to personal loans that perhaps make other forms of money borrowing more desirable. Both perspectives will be presented here.

Advantages of Personal Loans
One of the obvious upsides to personal loans is that you don’t need to use your home or car as collateral. This type of lending is called an unsecured loan, and is generally considered much less risky than conventional loans for the borrower. Personal loans are also usually readily available from banks, and can be acquired under short notice with little fuss if you meet all the proper criteria. This high volume of availability also means you have a lot of options to choose from when considering a lender, which can give you the opportunity to find the loan that works best for you.

Another advantage that personal loans have over other types of borrowing is that the time you have to repay them can range as far as 60 months, the equivalent of 5 whole years. Depending on where you’re lending from you can borrow varied amounts that will allow you to cover small expenses like car repairs or large expenses like covering the down payment on a house.

One particularly appealing aspect of personal loans is that they most always carry a lower interest rate than your credit cards. This can be highly beneficial for people who just need a little extra help paying smaller bills, such as getting groceries or covering an oil change. If the debt is paid off quickly, there is little downside to using a small personal loan for regular everyday expenses.

Disadvantages of Personal Loans
In stark contrast to the many advantages of taking out a personal loan, there are some distinct disadvantages worth mentioning. Most notably, personal loans have been hard to acquire by people who have less than impressive credit ratings. However, having stricter criteria for a personal loan makes sense. Since the debt is not secured by some form of property, the bank is taking a higher risk by trusting the debtor to pay back their debt, and therefore can afford to be more picky about who they lend out to.

Another disadvantage personal loans carry is that they can sometimes carry high interest rates. If you have bad credit, it’s possible to receive an offer that you might not be comfortable taking, like paying 30% interest. In those cases, you might just be better off going with a credit card if you plan on just covering small expenses.

Also, the interest for a personal loan is not tax deductable. The same isn’t true for secure loans, which sometimes can be tax deductable depending on your lender.

One final disadvantage that personal loans have is that they generally aren’t given in overly large amounts. With stellar credit, you can be an exception to this rule, but overall you can achieve a much higher monetary amount to borrow by taking out a secure loan. Also, if you pay off a loan before the end of the payment period, some lenders will charge you an early redemption penalty, which can also be annoying.

Are Personal Loans My Best Bet In Debt Consolidation?
Is a personal loan your best option? That answer relies mostly on your specific financial situation. Depending on circumstances, your monthly income and ability to pay back the debt, a personal loan could be greatly beneficial or a mistake that gets you deeper into debt. To find out if personal loan consolidation is your best bet for getting out of debt, fill out the free evaluation form below. One of our experienced representatives will contact you promptly with the details of your financial situation, and help you find the best way to get out of debt as soon as possible.