Good Sides of Personal Loans if Used Responsibly

Applying for a personal loan can help you in various situations. But before we get into that, let us try to define what is personal loan? Some loans are intended to be used for specific purpose. Do you need a house? You can take a mortgage loan. In need of a house to make transportation easier? Then apply for the California car title loans. Lack funds for education? You can apply for a student loan.

Personal loan on the other hand is different. It can be used for virtually anything that you could think of. Some lenders would want to find out what you’re going to do with the money lent to you. But so long as you have borrowed it for legal reason and use it responsibly, you can do pretty much anything you want with it. But does this specifically mean? Let me give you an example:

  1. Mortgage loan – when you take out such a loan, your home automatically becomes the collateral
  2. Auto loan – same goes with this loan, the car you buy serves as the collateral for the loan you applied for.

With a personal loan, there’s no collateral involved. Meaning to say, the loan is unsecured. But due to the reason that it is unsecured, expect for the interests to be higher than normal. Though, there are personal loans as well that are secured if you wish to lower the costs.

Here are situations in which taking a persona loan could be beneficial on your end.

Consolidating Credit Cards

Say you have several credit cards that have been maxed out. You may apply for a personal loan to be able to consolidate all charges in one payment every month.

What makes this more appealing is that, the interest of your loan can be lower compared to the APR or Annual Percentage Rates on credit cards.

Refinancing Student Loans

Through this, it can give you financial relief. The interest of student loan might be 6.8 percent or even higher which depends on the loan that you have. However, you may obtain personal loan with lower interests, enabling you to pay the loan faster.

However as you use personal loan in paying either a portion or all student loan, you’d lose the ability of deducting interest payments together with the benefits that come with the loan like deferment and forbearance. If the balance for example is quite large, then personal loan will not likely be able to cover it. So it’s best that you think of all the issues carefully before deciding to refinance student loans.

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