Pros & Cons of personal loans

Personal loans are a predictable way of borrowing money. Here’s everything you need to know.

Personal loans offer a set amount of money at a fixed interest rate and a fixed monthly payment. That’s why they are considered a predictable option when it comes to borrowing money.

But let’s dig a bit deeper and see what are the advantages and disadvantages of personal loans.

What’s cool about personal loans?

1-    If you have good credit, you can pay a fixed interest rate that is usually much lower than the ones offered by other products.

2-    You have the exact same monthly payment, month after month, so you know exactly how much you need and when it will be paid off.

3-    As a personal loan offers a set amount of money as opposed to a line of credit, there is no way you could be tempted to overspend and purchase things you then struggle to pay off.

What’s not so cool about personal loans?

1-    In order to get a loan with the best interest rates, you need to have excellent credit score —or individuals with a FICO score of 740 or higher.

2-    As you have to make a fixed payment each month, you can’t make smaller payments if you ever need to. You will have to come up with the exact amount to pay each monthly balance in full.

3-    Some personal loans have fees, such as an origination fee or insurance.

Personal loans are a good option for those who need to borrow for a specific goal such as a home remodel or repair, as it allows borrowers to come up with a repayment plan thanks to the fixed payments they offer. 

Before requesting a personal loan, compare lenders and what they offer to choose the one that suits you best!    

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