A student loan is for education, home loan for buying homes, car loans for buying a car and you use the credit card for everything else. There is a twist in the tale, there is a different kind of product which is becoming more popular, and that is the personal loan. These loans are flexible and are to be repaid in a short-term which is between a year to seven years. The interest rate is not fixed and is calculated based on your income, credit score and the loan terms. Many banks, credit unions, and online lenders offer personal loans. There are many benefits of availing a personal loan, Learn more about them here.
Lower interest rates than credit cards:
If you have any outstanding balance in your credit card, you will know that they charge more than 20% on it every month. But when you avail a personal loan the rate of interest will be much lower than what you pay on your credit card. The percentage of interest is calculated by your income, term and credit score. Having said that it is best if you can shop around and find a lending company which will provide the lowest interest rate.
Offers flexibility: Personal loans provide a lot of flexibility as the money can be used for any purpose. You can remodel your house, take a vacation, pay up your student loan or use the cash as you fancy. The same does not hold good for other loan products. A car loan can be availed if you buy a car; home loan has to be used to buy homes, etc. Personal loans are flexible and can be used for any of your cash needs without having to answer to the lenders. Click here to know the pros and cons.
Add diversity to your credit profile: Creditors prefer consumers who have a different credit profile. Availing a personal loan will add that diversity, and you are also proving to them that you are capable of paying the mortgage on-time until you have cleared the loan. All this adds confidence to lenders. Added to this, your credit score also improves because of this diversity. An individual who has excellent credit will find more lenders willing to give loans at lower interest rates.
Unsecured loans: One of the primary benefits of availing personal loans is that they are unsecured. That means there is no need for collateral; you will not need to pledge any asset to take a personal loan. The process of approval is fast, and the money gets disbursed to your checking account. There is very little paperwork needed, and also there is no need for multiple trips to your bank for getting your application processed.
Consolidate debt: If you have a car loan, student loan or any other type of loan and are paying a high rate of interest, then availing personal loan will be handy. You consolidate all your debt and go for a fixed rate personal loan, the balance goes down, and you pay a lower interest rate as you pay the principal.