The Pros and Cons of Personal Loans
Personal loans are the most popular loans used by Australians. With this type of loan, you can borrow anywhere from two thousand to one hundred thousand Australian dollars. That is how useful and flexible these loans are. However, while they do have their benefits, these loans have several drawbacks.
We will take a look at many types of personal loans, the advantages, and disadvantages. With this article, we will try to inform all consumers of how to pick and use these types of personal loans.
What Are Personal Loans?
A personal loan can help you in many ways. You can use it to pay your monthly bills, hospital bills, invest in a vacation, go shopping, and use it for refinancing purposes and much more. You can also use to buy a new car or renovate your home.
You can apply for personal loans using a credit union, a bank, over the phone or from an online lender. You can get approved in a minute or two weeks, at most. Of course, these loans do come with certain loan terms, costs, interest rates and so on and it is in your best interest to know these factors before making the request.
Types of Personal Loans
There are a range of personal loans that can give you the finance you need.
- Secured Personal Loans: For these loans, you will have to provide an asset as security. That means that you will have to use your car, house or other property to get lower fees and rates.
- Unsecured Personal Loans: Unsecured personal loans are more approachable than secured personal loans because you don’t have to provide an asset as security.
- Car Loans: If you found a new or a used car that you will like to purchase then this personal loan can help you seal the deal.
- Debt Consolidation Purposes: You can eliminate existing debt by applying for a debt consolidation loan. Turn multiple debts with different interest rates into a single debt with a lower interest rate.
- Line of Credit: Access your credit limit and pay interest on the sum you’ve used.
What Are the Advantages of Personal Loans?
- Low Interest Rates: Some personal loans come with lower interest rates. That means that you won’t lose money in the long run.
- Short Term Loans: Depending on the loan you requested, you will get either a long or a short-term loan. It also depends on your income, the loan amount and so on. Short term loans coupled with low-interest rates means that you won’t pay too many taxes in the long run.
- Accessible: These personal loans are accessible in terms of requirements. You can apply and get your request accepted even if you have low income, bad credit, existing personal loan or credit card debt. You can even still apply if you don’t meet the minimum requirements by using a guarantor.
What Are the Disadvantages of Personal Loans?
- Low Income: If you have low income, you might not be able to get your request accepted. So, it is best to know what the minimum requirements are before you apply for a personal loan so that your credit score won’t get affected by multiple inquiries.
- Bad Credit: There are situations where clients can get their requests accepted even if they have bad credit. However, if you are under the required credit score, you can be rejected. Check the minimum requirements before applying for personal loans.
- High Interest Rates: High interest rates are equivalent to losing money. It is in your best interest to find a dealer that can offer a personal loan with a low interest rate.
- Secured Personal Loans: If you use an asset as security, try your best not to default on the loan. Defaulting on secured loans will end up with you losing the property.
- High Fee Charges: Nowadays, you will have to pay a fee for even the slightest thing. For personal loans, it is not different.
- Long Loan Terms: If you have the money, try your best to get a loan that has a short term. Why? Try to combine costly fees with high-interest rates and longer loan terms. You will lose a lot of money, and it will make your loan almost worthless.
- Check if you can Pay for the Loan: Personal loans are attractive but can you pay them back? If you miss monthly payments or don’t pay at all, you might have a loan that you cannot afford to pay back. That can mean trouble for your finances.
When looking for personal loans, try your best to look for the lowest interest rates and fees and with a loan term that you can manage. Also, be careful of shady lenders that will try to offer you a loan that you cannot afford to pay back.
If you are interested in personal loans or have problems with them, then we recommend checking NSW Mortgage Corp. They will provide all the information you need so your next financial decision will be a good one.