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Personal Loan: Pros And Cons

Personal loans are all-purpose loans that you can take for any financial emergency or to obtain ready cash for any scenario. Although these loans may be readily available, it is important to know some of their pros and cons before deciding to pick one.

Pros
These loans are readily available to anyone experiencing financial difficulties. This means that you can go for it to settle any financial need ranging from medical expenses to buying home electronics and even gizmos that you fancy. Moreover, their repayment period is usually very friendly making it possible to go for as much money as possible without feeling a lot of financial strain during repayment.

Another great advantage of using a personal loan is the speed with the lender can avail the money. Unlike many types of loans that can take more than 48 hours, these loans can be provided within 24 hours. Not only do they require minimal paperwork, but the speed with which financial institutions process them makes them extremely popular with a lot of people. Furthermore, so many financial institutions have simplified the process even further by making it possible for one to apply for it online.

Those who need quick cash but do not have any collateral to back it up can opt for personal loans because lenders do not require anything as security. This could be because they have a shorter lifespan than car or home loans that some people go for. Furthermore, they are not only safe for the borrower but also provide the needed incentives for people to take them. Those who have bad credit can easily take up this loan since some lenders are not very strict about your credit score. In fact, if you manage to service it diligently, it can be a useful tool in boosting your credit score.

Cons
One of the main setbacks of a personal loan is its high interest rates. These loans are considered to be the second, after credit cards, in interest rates. The only way to avoid hefty monthly repayments is by ensuring that you settle the loan as fast possible. Moreover, this can also greatly limit the amount of money that you can borrow.

Today, many lenders require that you have a good credit score for you to be eligible for it. Since no collateral is usually needed, the only way some lenders can be safe from defaulters is by requiring them to have a proper credit score which indicates a great ability to repay the loan.

Unlike some common long term loans, many lenders do not accept part payments for this loan. This means that you have to service the entire loan regardless of your financial position. This usually translates to the loan being costlier than you had initially anticipated in case you run into financial difficulties along the way.

So, should you go for a personal loan? Before answering this question, you must consider the financial predicament that you may be in and other sources of financing available to you. In case you need quick cash but do not have the assets to back up it up, then this is the ideal loan for you.