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Article Series: Debt Relief & Debt Consolidation
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When
Should You Get a Personal Loan?
There will be times when we would experience
some financial difficulties. With the ever increasing cost
of living, which is already high to begin with, coupled with
the ever increasing instability of employment opportunities,
people need a bailout option in the event that the brunt of
financial dangers fall their way. Thank God, therefore, for
loans. Loans allow us to borrow the cash we need when we need
it, and they can be lifesavers during those times of extreme
financial distress.
But then again, loans aren’t for everyone. There are so many
safeguards in place, security checks that aim to protect the
creditor and, as observed by most, make life so much harder
for the borrower. A home mortgage loan requires that down payment
is paid for the subject house, for example. A construction
loan requires a good business history of at least 3 to 5 years.
These rather steep requirements make loans quite inaccessible
for most people.
Enter Personal Loans
Personal loans offer a great alternative for people who want
to acquire loans fast, with minimal requirements needed. Personal
loans are unsecured loans, meaning, they can be acquired without
the backing of collateral.
Personal loans are usually acquired through banks, building
society or other lending institutions. To a certain degree,
personal loans are often used synonymously with loans granted
by family or friends, but in the technical and legal sense,
such tag is a misnomer.
Why A Personal Loan Is For You?
Personal loans are one of, if not the easiest loans to garner,
at least when it comes to applying for one. Let us take a look
at the benefits of opting for personal loans.
- Personal
loans can be granted quickly. Without the burden of too
may procedural requirements, personal loan applications
can be acted upon as early as two working days in most
territories.
- Personal
loans have lower minimum amounts compared to other loans.
Personal loans can be acquired for as low as $3,000.
- Personal
loans are perfect for debt consolidation. If you have a subsisting
loan which has a high interest rate and locks
up an important property as collateral, when you want to dispose
of such property for extra funds, you could consolidate the
same with a personal loan to free up the property and reduce
the interests you have to pay. Also, you could opt to pay for
the old loan with a personal loan instead, if your application
for the latter is approved even with the existence of the first
loan.
Why A Personal Loan Is Not For You
But then again, personal loans aren’t for everyone. Let’s
take a look at the disadvantages of this type of loan agreement.
- Personal
loans are loans with a short tenure, the maximum of which
is 5 years. If you secure a personal loan, you have
to be doubly sure that you’ll be able to pay or it, together
with the corresponding interests, within the said time
period.
- Speaking
of interests, personal loans have relatively high interest
rates. As a general rule, the interest rate is proportional
to the amount of loan you acquire. Such a rate can be a low
8% but it could spike up to as high as 30%. The average applicable
interest rates, however, is somewhere between the range of
17% to 26%.
- These
interest rates are not tax-deductible, which should play
a crucial part in planning for a sustainable budget.
- Because
personal loans are unsecured, lending institutions would
check up on the applicant’s credit history. If your credit
history is rather tarnished, you might find it hard to be granted
a personal loan.
Should You Or Shouldn’t You?
A personal loan is a great way to be granted the cash that
you need really quick. If you find yourself in a financial
bind that requires a fast fix, applying for a personal loan
would be a prudent option. Just make sure that you would be
able to pay for the same within the short period that will
be provided, otherwise, as with other kinds of loan, you might
end up in deeper trouble than when you started out.
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by SolveYourProblem.com : 2006
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