Deciding whether or not a personal loan is right for you can be a tough decision. There are a multitude of modern financing products that you can choose from if you want to borrow money. And while reading overviews of personal loans and the details associated with them is a good way of getting your head around the subject, sometimes it can be a bit too much information to take in.
We’ve created a pros and cons section to provide you with a concise and easy to understand summary of all the benefits and drawbacks of personal loans. Check it out below:
- Low Interest Rates – Personal loans have some of the lowest interest rates out of any of the modern lending products. You’ll find that many personal loans have interest rates that are set at just a quarter of your typical credit card interest rate. This means that they’re one of the most affordable ways to get access to the cash that you need.
- Fixed Terms – You pay back your personal loans over a fixed term, which means there is a predetermined payment schedule and payment time-period when you sign up for the loan. This makes it much easier to pay off your debt and remain organized. Credit cards on the other hand can leave you in a continuous debt trap.
- Easy Application Process – The modern personal loan application process has never been easier. You can head online and apply for a loan directly through a lender – you’ll typically receive a decision instantly. There are a variety of different lenders to choose from, which makes it easy for someone of any credit background to get approved.
- Not Flexible – When you sign up for a personal loan, you’re agreeing to fixed terms for the duration of your loan. Unlike revolving credit, you can’t decide to borrow more money from your personal loan. You’ll have to apply for a whole new loan if you end up needing more cash. Also, many lenders will have set payment terms that they will not deviate from.
- Pay Interest on What You Don’t Use – Another major drawback of personal loans is that you pay interest on what you don’t use. This is a major pain for someone who doesn’t know exactly how much money they need to borrow. The amount you will be paying back to your lender is predetermined at the point of signing the loan. If you change your mind about how much you’ll need, you’ll still have to pay interest on what goes unused. Personal loans are not lines of credit.
Overall, personal loans are a great lending product that offer the right borrower the perfect features. If you’re someone who wants to have an organized payment structure and low interest, this is the perfect match for you. You’ll just want to make sure you know exactly how much money you want, as you have to pay interest on the full amount that is borrowed.