Are you considering taking out a personal loan?
If so, you’re in good company. In 2019, nearly 21 million Americans took out personal loans averaging $6,825. Given the tumultuous events of 2020 and uncertain financial times, more people than ever will be getting a personal loan.
Why get a personal loan though? Aside from the obvious (immediate cash), are there any other benefits of a personal loan?
Keep reading for five personal loan benefits you may not have considered before.
Use the Funds for Anything
One of the best things about why to use them is that personal loans can cover anything you need or want. From buying a car, planning a wedding, taking a vacation, or getting elective surgery, you can generally use the money for anything you want.
Of course, it’s good to remember that a personal loan is still a debt that needs to be repaid. Getting a personal loan every time you want to take a trip to Hawaii could leave you in worse financial shape than when you started!
Lower Interest Rates & Higher Borrowing Limits
Compared to credit cards or other types of loans, you might enjoy lower interest rates with a personal loan. Those with good to excellent credit could qualify for personal loans with APRs as low as 10%.
If you’re trying to consolidate debt or lower your monthly expenses, this could be a terrific option. You may also be able to take out a loan for more than your current credit limit allows, which could be a lifesaver if you need to make a big purchase.
No Collateral Required
Secured loans often require you to use collateral. Before you receive the funds, you hand over the deed to your house, car, or other valuables. If you fail to pay back the loan, the creditor takes possession of your belongings.
With an unsecured personal loan, you don’t have to worry about any of that. You can get the cash you need without risking the roof over your head or a precious family heirloom.
Predictable Schedule of Repayments
Credit card payments fluctuate each month based on the current balance and interest rate. This can make it extremely difficult to manage your budget!
In contrast, a personal loan comes with a fixed payment schedule that stays the same for the lifetime of the loan. You’ll know exactly how much you’ll pay for an exact number of months, making budget-planning a cinch.
May Improve Your Credit Rating
Did you know that diversifying the types of accounts you have can actually boost your credit score? If your only debt currently is a few credit cards, an installment personal loan may help to build and improve your credit history.
Of course, to experience this benefit, you’ll need to keep up with those payments and make them on time every month.
The Benefits of a Personal Loan: Now You Know
These are just a few of the many benefits of a personal loan. If you think this could be the right option for you, talk to your bank or financial advisor to learn more!
Now that you’re well-versed in personal loan benefits, what’s next? Keep browsing our site for more great financial and lifestyle advice.