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A personal loan is an unsecured, fixed-interest loan that borrowers can repay in equal monthly installments. Obtaining a personal loan requires good credit, but they’re usually quick and easy to obtain and can be used for a variety of purposes.
Curious about the benefits and uses of personal loans? Read on to know more.
Repay in fixed monthly installments
Many borrowers worry about fluctuating interest rates and how they affect credit card APRs. With personal loans, there are no such concerns.
Personal loans carry a fixed interest rate. Lenders typically let borrowers know upfront how much interest they’ll pay throughout the life of the loan.
Borrowers can easily calculate their monthly payments in advance and create a monthly budget to accommodate the payment. They also have the security of knowing that monthly payments never change, even if market interest rates rise.
Use the loan as needed
Unlike car or student loans, borrowers can use personal loans at their discretion. Use them to consolidate debt, take care of home or car repairs, buy new appliances, or even pay for a certification.
There are very few restrictions on using personal loans, so borrowers can use them to take care of multiple different expenses, including travel, food and groceries, emergency expenses, and more.
No collateral
Secured loans such as mortgages or car title loans require borrowers to pledge collateral (like a house or car). This way, they can take advantage of the value of their property. However, if the loan is not paid off, the lender has legal rights to seize said collateral.
On the other hand, unsecured loans will be granted based on the borrower’s credit. As these loans do not need collateral, borrowers will not put any of their possessions at risk. That being said, failure to repay the loan in time can bring down a person’s credit score and make it difficult for them to apply for more loans.
Repayment terms
In Canada, borrowers can get a personal loan of up to $15,000 at a time and choose a loan term ranging from 6 to 60 months (about five years). This gives borrowers some leeway with their monthly payments.
Borrowers can choose a monthly payment that fits well within their budget, which in turn helps them repay the loan on time.
The bottom line
Personal loans are a great way to fund a variety of expenses. They offer quick cash and repayment terms that fit easily into one’s budget. The loan also carries no stipulations as to how it should be used. However, borrowers should review their options carefully and choose the best term length and monthly payment that they can afford.
Personal loans can be a great solution, whether someone wants to consolidate debt or pay for an unexpected expense. With the right lender and terms, it is possible to get the funds that one needs and take care of their obligations in no time.
