What Are the Pros and Cons of Personal Loans Online?
Several banks and lending firms offer personal loans online with attractive interest rates and flexible payment options. For most people, this is the most viable and popular option. Not only is it easy and convenient, it is also not as difficult to apply for comparison to other financing options.
Are you considering personal loans? Before you do, there are some things that you have to consider.
Basics of a Personal Loan
You may have come across the term “personal loan”. But what does it really mean? What is this kind of loan? There are actually two different types of personal loans: secured and unsecured.
A secured personal loan is the one that comes with collateral. The borrower needs to have an asset that can be used as collateral. It can either be a car or a property. In the event of default, the lender takes over the asset. Secured loans have lower interest rates and better loan terms.
Whereas unsecured loans, these do not have collateral, which means that in case of default, the bank can only resort to legal means to collect the money. This makes the loan riskier for lending firms. So, they charge higher interest rates.
Pros of Personal Loans Online
Getting a personal loan has its share of advantages which include the following:
- Convenience and ease of application: Unlike other kinds of loan, applying for a personal loan online is quite easy. You only have to fill up an application form online. There is no need for you to go to the bank.
- Lower interest rates: One of the pros of having a personal loan is compared to the traditional type of loan, the interest rate offered is lower.
- Quick Approval: Have you ever experienced applying for a conventional loan and you had to wait for a long time only to end up being denied. With a personal loan, there is less paperwork. Hence, loans applications are approved right away.
- Instant Cash: It only takes a few business days once your loan application is approved. This what makes personal loans a viable option for many. If you are in need of cash in a really short period of time, this might be the option for you.
Cons of Personal Loans
We have talked about the advantages of getting a personal loan, how about its downsides?
- Need for Good Credit Score: Since these loans are considered to be risky, most firms offering personal loans will require their borrowers to have good credit standing. So, if a borrower has a bad credit score, your application might be rejected.
- Another disadvantage is the fact that it does not address your financial woes. Oftentimes, people tend to borrow personal loans to spend, to pay bills or to pay off other debts. In which case, your loans will only accumulate which can make it a whole lot more difficult to pay.
Important Things to Consider
After weighing the pros and cons and you finally decide that this is the type of loan for you, there are essential things that you have to take into consideration.
- Find a trusted and licensed lending firm. They should be a member of FDIC. This is to ensure that you have a reliable lender. After all, you will be providing your personal data and information during the application process.
- Read reviews about the company. What do people say about them? How about their loan packages?
Should You Get a Personal Loan?
Getting a personal loan is something that you have to really take the time to think about. Financial needs and circumstances vary from one to another. But if you are getting a personal loan, it helps that you weigh your options and take the time to do your own research so you can find a reliable lending firm that will not take advantage of your situation.