Over the years, people have been utilizing different ways on how to survive in this world when dealing with a financial dilemma. There are those asking help from friends and families, others from moneylenders and worst others resort to illegal doing.
Families and friends can help you, however, there are some instances that money and payment issues taint relationships and you wouldn’t want to add up financial issues by having a lawsuit against you.
Don’t worry, there is another way and that is an application for a personal loan. But what is a personal loan? How does it help in my financial problems? Will it be enough to suffice my personal needs and responsibilities or will it the start of my financial sinkhole?
A personal loan is a fixed amount of money borrowed at a fixed rate and repaid over a fixed amount of time. You can get a personal loan from a bank or online lender. It can either be secured or unsecured. A secured loan is a loan wherein the borrower pledges some asset as a collateral, while in the unsecured loan, the lender cannot automatically take your property. The common type of secured loan is car loan and mortgage, and unsecured loans are credit cards, student loan, and personal loan.
Nowadays, people who are responsible for dealing with their finances have credit cards. They use it for their daily groceries, car purchases and maintenance, and house mortgages. The number of unsecured personal loan increases due to its advantages, however, the secured personal loans hold real value for qualified borrowers as well.
For better understanding, the significance and differences of secured and unsecured loans will be explained briefly.
Advantages of Personal Loan
1. High borrowing limit
A credit card line poses limits and if you are unable to settle it diligently, it would be cut off immediately. The line limits depend on the card network on what range you would fall. There are two kinds: a lower limit and a higher limit. Lower limits are reserved for applicants who barely qualify for the card while higher limits are well-qualified applicants. While a lending company’s personal loan borrowing limits are more generous compared to credit line limits. It may vary depending on the lenders.
Both the credit card issuers and the personal loan providers like cashmart.ph set factors to set the spending limits. It usually comes from credit reports which include: debt-to-income ratio, recent bankruptcies, timing, and frequent credit inquiries, payment pattern, income and employment history, and credit score.
With this, you can base your applications on how much funds do you need. But always take note that they will still check on your records. Make sure that everything is settled so you can have the financial assistance you need.
2. Lower interest rate
The interest rate between a credit card and personal loan is comparable, the personal loan interest rate is lower.
Unsecured personal loan rates are the same from start for very well-qualified borrowers. However, credit cards have a low or no-interest rate introductory offer for a certain period but spike up one the period ends.
3. No collateral needed
Borrowers do not need to put up with collateral in an unsecured personal loan. Although the consequences of default are severe, your personal properties such as vehicle, house, and documents are not included. Safety and security can be attained as long as you have done your repayment diligently.
Having multiple credit card accounts with different spending limits, interest rates, payment dues, and issuer policies is difficult to manage rather than having a single, fixed-rate personal loan.
You can borrow a bigger amount in a personal loan and just have a repayment done as scheduled without thinking of other dues. If you manage your repayments well, you will be able to build a better credit score.
5. Foreseeable repayment schedule
Installment loans with fixed interest rates, repayment terms, and monthly payments are part of the repayment scheme in personal loan. Unlike the credit card line, then only constant is your monthly payment due date.
The required minimum monthly payment depends on your credit utilization and your interest rate is subject to change with benchmark rates.
These reasons serve as the edge of having a personal loan. Evaluate yourself and apply if you think you are qualified to have a personal loan.