Originally posted on https://bonsaifinance.com/real-talk-the-pros-and-cons-of-personal-loans-lc/
We’re going to get tight up close and personal here. It’s time to take back control. Your credit card debts are a little out of hand. Then there’s that unexpected car repair to pay for.
The pressure’s on. You know you could get another credit card, but would that really solve the problem? The solution may actually be quite simple.
We’re here to help you look a popular option by weighing up the pros and cons of personal loans.
They are growing at a faster rate than any other type of consumer debt. There is a staggering balance of $120 billion personal loan debt in existence. So why do so many people prefer them?
A Guide to the Pros and Cons of Personal Loans
With this kind of loan, you are simply lent a certain amount for a specific length of time. There will be an agreement to pay the loan back in monthly installments.
The loans can be unsecured. That means you don’t have to put up your home or car as collateral. The interest rate you pay will be based on how good your credit score and history are.
Debt Consolidation and Budgets
Personal loans allow you to consolidate several credit card debts. That means you turn several debts into a single one. This is really a refinancing process.
You may be paying high rates of interest on several cards or loans. If that’s the case then you could lower your monthly payments and interest rate by moving your debt into a single personal loan.
The other big advantage of a personal loan is that they have a clear-cut beginning and end. This can really help bring clarity to your budget.
These types of loan are also easy to apply for. You will usually get a quick decision as to whether your application has been successful.
If you have a small unexpected bill to pay, a small personal loan could be the answer as the cash can show up in your bank account in a few days.
Taking Care of Your Finances
As with any kind of debt, there can be pitfalls with taking out a personal loan. One of the biggest dangers is that it can give you a false sense of debt freedom. That could lead you to then take on further debt with new credit cards.
By consolidating, loans may have been paid off to prior lenders, but that does not mean you are rid of the debt. It’s an important point to remember.
You must budget wisely. You should be able to pay off the personal loan without building up a new set of debts on the side.
It’s also vital that you check the interest rate you are being offered. Sometimes the best offers are restricted. Make sure you read all the detail of any deal so that you’re sure it matches all your expectations.
Making Sense of Personal Loans
The pros and cons of personal loans are actually not overly complex. Used wisely they can be a great way to consolidate loans or pay for an unexpected expense.
For more detail about personal loans, check us out here. We have the lowdown to help you make the decision that’s right for you.