Recently, there has been a lot of talk about debt. Most people have had to take a step back and reevaluate whether or not they really need to take on more credit. As a result, the number of loans being taken out has drastically gone down.
So, in this review, we are asking – is there a benefit to obtaining a personal loan? Most people are of the opinion that taking out any type of loan is a bad move and will certainly mess with your credit score. Plus they believe the interest rates are often high and therefore it’s just not worth it.
But, loans do have a purpose in our lives. They help us buy houses, purchase cars, pay for school, etc. So, they are not as evil as we have been led to believe. While taking out a personal loan isn’t for everyone, it is a very smart move if you are looking for some quick money to take care of your personal needs.
They Serve Several Purposes
Getting a personal loan means that you need the money quickly. This is money that can be utilized for a variety of uses. The reason behind this is that personal loans do not require any collateral, and as such, you can utilize them as you wish.
Some of the things you can do with personal loans include the following.
- Pay off or consolidate your debts.
- Spend the money on unexpected expenses.
- Finance a big purchase such as a household appliance.
- Pay for your wedding.
- Go on a much-needed vacation.
- Buy yourself a car.
There are really no restrictions when it comes to how you can utilize your loan. Therefore, the choices are many and they are all open to you. You may, however, need to share what you are going to do with the money when the lender gives it to you. That being said, you really do not have to stick to it. It’s simply a formality that they must include for audit reasons.
Low-Interest And High Borrowing Limits
If you compare personal loans to credit cards, they tend to have lower interest rates, and they definitely have a larger limit amount. In fact, the average APR for personal loans ranges anywhere from 10 – 28%, while the average ranges for credit card interest are 13 – 22%.
You should, however, know that the best deals are only available to people who have great credit scores. If your credit score is less than what is required by the lender, it means that you will end up paying much more interest than you would otherwise.
Helps Build Your Credit Score
It is important to understand why this is a benefit of obtaining a personal loan. Personal loans are, first of all, a great way to build your credit if you do not have any credit history. This is because you can only qualify for one after showing proof that you have a source of income and can cover the monthly payments.
Secondly, the period given for repayment is usually short, which means that, with timely payments, you can close the loan within a short period of time. Taking out the loan in the first place is recorded in your credit report. Then, repaying the loan on time helps to show that you are trustworthy and will increase your credit score.
Predictable Payment Schedule
This is an incredible benefit of obtaining a personal loan. In most cases, you will be required to pay the same amount of money each month, which means that you do not need to make any calculations to determine how much you need to pay.
When you do not know how much is required of you each month, you may struggle to make the payments. However, unlike credit cards where the payment schedule changes each month, personal loan payment schedules never change. Therefore, you can easily work it into your monthly budget.
The set payment date also doesn’t change. You can therefore clearly see how easy it is to keep up with your payments every month. For this reason, you will rarely find yourself defaulting on a personal loan.
You must, however, remember that although we are talking about the benefits of obtaining a personal loan, it is still a debt. A personal loan must be repaid, and therefore, it is never wise to take out a loan without having a set purpose for it. This will, unfortunately, be the start of your problems with debt. Always think carefully before applying for any loans.