A personal loan is a loan given by a bank or other lenders for a borrower’s personal needs. Some also refer to it as an “unsecured” loan owing to the fact it is not secured against any assets like a house or car. There may be instances when you will need funds for one reason or another, such as building or expanding your business, paying medical fees, paying for your kids’ school fees, getting your car repaired, paying your rent, and many others. Personal loans can be a good alternative for times like these. Here are some of the top reasons to get a personal loan.
Get Installment Payments
With a personal loan, you are lent a specific sum of money for a given period of time, and pay for it in regular monthly installments. The rate that will be provide will depend on your credit history and credit score. A personal loan can be the right option if you want to consolidate your present debt, such as credit card. It is considered as refinancing, so you may be able to decrease your monthly payment and interest rate.
Pay Lower Interest Rates
If your credit card balances and interest rates are extremely high, a personal loan may be the ideal option when you are considering debt consolidation. Depending on how much you are qualified to borrow, a personal loan can consolidate your credit card balance into your personal loan with a lower interest rate and lower monthly payment cost. Interest rates for personal loans are definitely lower than credit card cash advances or “quick cash” payday loans.
Fixed interest rates create stability. A personal loan offers you a lump sum of money up front, which you can pay back over a fixed period – usually lasting one to five years. Furthermore, loan rates can be negotiable, which is one of the best reasons why people prefer a personal loan over a credit card. Another reason is that when the loan agreement is signed, the interest rate is fixed for the whole repayment period. This signifies that your interest rate will not change and your payments will remain the same.
Enhance Your Credit Score
If you do not have diversity in the kinds of credit you maintain, a personal loan may be a great choice. Personal loans are one component of your credit score when it comes to the types of accounts you have. Revolving accounts, like credit cards, are only one type of credit. These accounts signify that you can effectively manage loans that are not paid off on a regular basis.