Top 5 Advantages of Getting Personal Loans
Are you wondering whether to take a personal loan or not? What reasons do you have for taking or not taking the loan? Different people make different financial decisions. Some decide not to take any kind of loan. There are also some whose achievements have been financed by loans, in part or in whole.
Loans help people who have different financial needs. If you want to consolidate your debts, sort emergencies, and pay for other things, a personal loan might just help you. In this article, you will find a list of advantages that taking a personal loan can bring.
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But first, What is a Personal Loan?
A personal loan is a short-term kind of loan that you can take from an online lender, credit union, or bank. You can use this loan for different purposes including:
- Financing a wedding
- Paying medical expenses
- Paying for education
- Purchasing household items, and
- Debt consolidation
You are required to pay back the personal loan in installments over a given period, maybe 2 -7 years. The installments are however fixed. A personal loan is also unsecured. What this means is that you cannot back it up with collateral such as a house or car. For this reason, the lender will consider your credit history, credit score, and other factors before giving you the loan. It is easier to get a personal loan, and as such, it is recommended when you need cash quickly. (1)
How do Personal Loans Work?
You must first begin by making an application. Once your personal loan application gets approved, the money is all deposited into your bank account. You can get this money in your account within 24 hours or a few weeks. The period depends on the lender. Once the loan is disbursed, you are expected to start repaying it monthly, until you clear the debt. (2)
The Advantages of Getting a Personal Loan
Getting a personal loan is advantageous in the following ways:
- Debt Consolidation
Most people take personal loans to consolidate their debts. If you have several credit cards or other loans, you can take a personal loan and use it to pay off all such debts. As such, you don’t have to remember so many loans every month. You will only need to remember your fixed-amount monthly installment.
You may get lower interest rates if you take a personal loan and use it to settle your credit cards. These lower rates will help reduce your debt repayment time and the interest you pay. (2)
- It Can be Used in Different Things
Another top advantage of taking a personal loan is that you can use it to cover different things. Many people take personal loans for home remodeling, to purchase appliances, pay for weddings and vacation costs among others.
Every lender is different and will allow you to use the money to sort household, family, or personal needs. Some lenders restrict borrowers from using the personal loan for starting a new business or purchasing real estate. YOu can however confirm this with your lender before taking the loan. Establish whether you can use it for the purpose that is leading you to take it. (3)
- A Personal Loans Doesn’t Require Collateral
Personal loans are usually unsecured loans. You are therefore not expected to pledge a collateral. For this reason, you don’t have to risk losing your valuable assets like your car or home in case of defaulting on the loan. (3)
- Accessing Cash Fast
Every lender will process your personal loan application, approve and fund it within a different time frame. Most lenders however provide the cash fast, usually within 24 hours. Some may take one or a few weeks, but in most cases, you get the cash quite fast. A personal loan is therefore feasible, especially during emergencies.
Depending on how fast you need the cash, confirm how long your lender takes to process and fund the loan before applying for it. (3)
- Building Your Credit
You should pay your personal loan regularly, usually every month. The lender reports your payment history or record to the major credit bureaus. If you pay the loan consistently and on time, your credit score increases. (3)
Loans help people who have different financial needs. If you want to consolidate your debts, sort emergencies, and pay for other things, a personal loan might just help you. Take advantage of it, but don't forget to pay it consistently!
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