Taking out a personal loan can be a good way to solve your financial difficulties. A personal loan is a collateral-free loan, generally ranging from $5,000 to $25,000. Repayment terms vary, but generally last up to 60 months.
Whether you’re looking to borrow some money for a big purchase or to consolidate your debt, a personal loan is often the smart solution.
6 Benefits to Getting a Personal Loan
Before making any financial decision, it is imperative you understand the contributing factors to how a personal loan can help you financially and we will start by explaining in detail the benefits of a personal loan.
1. No collateral is required
Other types of loans will often ask you to offer a financial asset, such as a home or a car, as collateral that the bank can seize if you don’t pay them back. As a personal loan has no such type of requirement, this means you don’t risk losing something you own if you are unable to repay your loan.
2. You won’t be charged annual fees
Most loans charge annual fees which add quite a lot to the cost of the loan, however personal loans do not. Each personal loan provider will have its own rules – check out lenders like Prosper
and Lending Club
to see how your exact loan requirements and credit score effect APR and Loan Term.
3. Some personal loans charge low interest rates compared to credit cards
The interest rates of different personal loans may vary, however, sometimes taking out a personal loan can be cheaper than using a credit card. That’s why it’s important to look at the different options available to you.
4. Minimal documentation is required, making personal loans easy to obtain
Often, when you want to take out a loan, banks will ask you to fill out mountains of paperwork and to provide them with a large list of documents. When you take out a personal loan there is very little paperwork involved, and you’ll only have to provide a few basic documents.
5. The loan can be granted quickly -- sometimes within 24 hours
Waiting for approval for a loan can feel like an eternity. However, with personal loans, because there is very little paperwork and documentation involved, sometimes you can have cash in your wallet within 24 hours.
Even for personal loans that take a bit longer, the wait-time between application and approval is much shorter than for other types of loans, meaning that your financial headache is cured that much faster.
6. It can help improve your credit
Having a good credit score
is essential, especially if you’re considering being approved for a mortgage or credit card at some point in the future. By providing you with the opportunity to make regular payments, month after month, a personal loan can help you to improve your credit rating, thus increasing your standing with banks in the future.
As detailed above, the benefits of personal loans are many and they can be an easy and convenient way to solve an immediate problem.
Whether you’re looking to get some quick cash for a big expense like a wedding or home improvements, or simply to consolidate your debt, a personal loan is an effective way to obtain money fast, without incurring annual fees or offering something you own as collateral.
About Sarah Pritzker
Sarah Pritzker is a freelance writer with a keen interest in the world of investing.
She enjoys helping her readers make sense of investment topics like online trading,
debt consolidation, personal loans, and others, as well as helping them stay
up-to-date with current money management tricks and trends.