Personal Loans: The Good, The Bad, and The Ugly

by Martin

When it comes to taking care of emergency finances, many people turn to personal loans from a bank or other reputable lender. But before you sign those loan documents, there are a few things about personal loans that you need to know that will help you to make the right decisions.
A personal loan is just like any other financial product in that you need to shop around to find the best deal. You would be surprised at how much a lender is willing to work with you on a personal loan that you can use to consolidate debt or pay off auto repairs.

The Good

The good thing about a personal loan is that it can be a quick source of funding in emergency situations. A persona loan from a bank or other reputable lender has an interest rate and repayment schedule that is significantly better for consumers than payday loans or other short-term sources of financing. Monthly finance charges for standard personal loans are also much more reasonable than payday loans.

If you have good credit, then getting a personal loan can be a relatively simple process. Even if your credit is shaky, you can still put up collateral and get the loan you need. This is called a secured personal loan and is a very common form of funding for people in need of quick cash. If you have stewarded your personal affairs, chances are you will be able to get approved for one of the standard unsecured loans available on the market. Not only are these using your personal property as liability, but they they are also competitively priced.

The Bad

If you default on your personal loan, then you will lose your collateral. If you put up your car as collateral, then the bank has the right to take the car and auction it off to pay your debt. This only becomes an issue if you default on the loan, which is why it is always a good idea to stay up on your personal loan payments.

You may be approved for a personal loan, but the loan amount may fall short of the funding that you actually need. When this happens, you are stuck trying to find a way to fill that financial gap and get the emergency funding you need.

The Ugly

Some lenders make borrowers go through a comprehensive process to get even the smallest personal loan. If your finances are in shambles and you need help getting things back together, then a personal loan may not be the best option. The application process can be complicated and, in some cases, almost demeaning. Here’s a checklist of things to do before you apply, which may mean jumping through fewer hoops in the long run. If you are struggling with repayments, you’d be surprised how much most banks will work with you. Whilst mortgage focussed, this guide perfectly illustrates this point.

A personal loan is a funding option that many people use to pay down debt to get their roof fixed. Before you spend time hunting for a personal loan, you should take the time to learn how they work and what you can expect with the application process.

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