In case you need additional money to pay the expenses housing, liquidate your debts with high interest or financing an important moment in your life, you have the option of requesting personal loans. However, before acquiring it, it is necessary to know the advantages and disadvantages, as well as being clear that you must make responsible use of them to fill a gap in your budget without having to risk your assets or other properties.
Depending on your credit score, income and debt-to-income ratio, you will get the level of personal loan rates.
Read: 7 terms that come in your mortgage loan application and you should know.
What is a personal loan and how does it work?
Loans are used for almost anything, depending on the conditions of the lenders. In addition, their interest rates are fixed, which means that they will not change as long as you are paying the loan.
Personal loans are a type of installment credit that provide a certain amount of money. They generally do not have collateral to secure funds and repayment can average from one to 10 years.
To request them, you have to give your personal, financial information and the details of the desired loan to the lender, who, before approving it, will perform a hard credit check to make sure that your financial picture and credit score are edifying to acquire the loan.
Disadvantages of personal loans
Personal loans may not always be the best option for all client situations, since interest rates are not always the lowest, especially for clients with bad credit, who would pay higher interest rates than with their credit cards.
In addition, they can count on fees and fees that in the end increase their costs exponentially. Similarly, they have a higher fixed monthly payment and if they are not paid at the end of the term, some lenders charge penalties with high fees.
Advantages of personal loans
The flexibility and versatility that personal loans provide allow you to use them for different purposes, from paying off debt to paying medical bills. In case you want to make an important purchase without having limits on how and in what to use your money, a personal loan may be the best option for you.
In addition, they do not have a guarantee requirement to be approved. Which means that you do not have to collateralize any property to ensure that you will pay your funds. However, in case you do not have the ability to pay it under the terms agreed with the lender, you may face serious financial problems, but without the worry of losing your home or car.
They are easy to manage for paying off numerous credit card debt, since a personal loan with a single fixed-rate monthly payment is better than multiple credit cards with different interest rates, dates, and other issues.
For more information, visit the Credits section of My Pocket.
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