The number of Americans with personal loans has grown in recent years, with personal loan accounts reaching 19.5 million in 2018. That figure will only continue to grow as people borrow money to meet their financial needs in an increasingly tough economy.
But why exactly do people prefer personal loans to most other types of loans? Well, these loans have many benefits that most other loans don’t. In this post, we outline some of the top benefits of a personal loan.
What Is a Personal Loan?
A personal loan refers to money that you borrow from a lending institution and repay over a certain period of time. The money you receive plus interest is usually repaid in monthly installments over time.
You can use the money for just about any purpose, including paying home improvement costs, covering medical expenses, consolidating your debt, and so on. Most personal loans are unsecured, which means that the loan isn’t backed by collateral.
Here are some of the advantages of getting one.
Higher Borrowing Limits and Lower Interest Rates
Generally, you can get a much larger amount when you apply for a personal loan than your credit card might allow. These higher borrowing limits can prove very beneficial when you need to cover a large expense, such as doing a home remodel.
Borrowers also enjoy a lower interest rate when they take out a personal loan than when they opt for a credit card. Of course, the best deals on personal loans are available for consumers with a solid income and a good credit score. That being said, people with imperfections may still qualify for personal loans, so don’t be afraid of shopping around.
Predictable Payment Schedule
When you use a credit card, your repayment schedule follows the minimum payment amount and changes as you pay down the balance. If you keep using the credit card without paying off your balance, the amount you pay per month changes. It’s thus difficult to know whether you’re making progress in paying off your credit card debt.
Personal loans have a set payment schedule. As a result, it’s easy to see when you’ll finish paying off your debt, as well as how much interest you’re paying.
Where Can You Get Personal Loans?
Borrowers have a variety of options when it comes to where they can get personal loans. Currently, there are many online lenders such as Bonsai Finance that make it easy and convenient to get personal loans.
You may also get a personal loan from a local credit union. These institutions generally offer friendly interest rates and loan terms that are more flexible compared to other lending institutions.
You may also be able to get a personal loan from some major banks and financial institutions.
Enjoying the Benefits of a Personal Loan
The benefits of a personal loan are clear, which is why they are so popular. Their higher borrowing limits, lower interest rates, and predictable repayment schedule make these loans the ideal solution when confronted with a financial need.
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