Discover if a personal loan is right for you.
A personal loan can be a handy financial tool when used properly. Unexpected expenses come up and family needs change. You may need to make home improvements, consolidate debt, or pay for a big-ticket item, regardless of the expense, a personal loan can help. However, as with other loans and forms of credit, personal loans come with interest. Read on to discover the advantages and drawbacks of personal loans to decide if this type of loan is right for you.
Advantages of personal loans
1. Consolidate high-interest debt
One of the most popular uses of personal loans is to consolidate high-interest debt. An advantage to using a personal loan to consolidate debt is to that it makes managing debt simpler and can reduce what you will owe overall. For example, if you have multiple high-interest credit cards with balances, you could consolidate them all into one personal loan. You will be able to make one payment, versus having to remember to make multiple payments. Your interest rate may be lower on your personal loan than your credit cards, allowing you to save money and payoff debt faster.
2. Improve your credit score
If you are having difficulty paying off high-interest debt like payday loans or credit cards, your credit score might be suffering. Your credit usage is a factor in your credit score. By consolidating your debt with a personal loan, you could pay it down sooner, and improve your credit score. If you don’t have a credit history, taking out a personal loan could help you build credit. Just remember to make your payments on time and only spend what you can repay.
3. They cover a broad range of expenses
Many loans can only be used to pay for specific expenses. For example, a mortgage can only be used to pay for your home. An auto loan can only be used to pay for a car. A personal loan can be used to cover a wide range of expenses including weddings, travel, home improvement projects, home repairs, healthcare expenses and more.
4. The interest rates can be lower
Depending on your credit score and income, you could secure a favorable interest rate. Personal loans often have lower interest rates than credit cards.
5. They don’t require collateral
Some loans require collateral. Lenders that provide secured loans use your collateral to qualify you for funding. The interest rate can be lower, but you risk losing your property if you can’t repay your debt. Personal loans are unsecured, which means they don’t require you to up collateral to get funding.
6. You don’t have to have good credit
There are many personal loan lenders who will fund borrowers with poor or no credit. Just keep in mind your terms will be less favorable than someone with good credit.
7. You have many choices
You have many choices when it comes to personal loans, which is good for the borrower. Lenders compete for your business, which can help you secure favorable rates and terms. You can request a personal loan through Brighter Pays any time.
8. Your payments are fixed
Personal loans come with fixed payment terms, which means you will pay the same amount each month through the life of your loan. No surprises means you can create a play and budget to help you repay debt faster.
9. Great when you need cash fast
Other types of loans can take longer to process. If you need cash fast, a personal loan is a great option. You can apply online and receive an approval decision in minutes. Funds are typically transferred to your account in one business day.
Is a personal loan right for me?
There are many things to consider before applying for any type of funding. Loans require you to pay interest and many come with fees. You must consider if you need the funding and if you can repay the debt. Create a budget and plan to payoff debt quickly to owe less overall.
This post is not intended to be a solicitation for a loan. Brighter Pays provides these blogs for entertainment and informational purposes only. Remember to consider all your financial options before making any decisions related to credit.