When people hear the phrase ‘personal loan,’ they usually think they’re bad news. While it’s true that there are risks inherent with taking out a loan, they don’t always have to be a bad thing for those who will be responsible with the repayments. In fact, there are many advantages to personal loans that you may not be fully aware of, and this article will explain those advantages to help you see why they’re not necessarily all doom and gloom.
However, it has to be stressed that you must be responsible with repayments if you want to avoid costly fines and a ruined credit rating. You might even know somebody who has had their assets repossessed as a result of failing to make payments on time, and that means you’re already aware of what some of the negative consequences can be.
You might be one of many people who desperately need a loan but don’t currently have a good enough credit rating to be offered a reasonable interest rate. Alternatively, a poor credit rating could mean applying for a bank loan simply isn’t an option. Luckily, there are other ways to get a loan for those who need one, and that doesn’t mean turning to a payday loan provider that charges extortionate interest rates. You can apply for a guarantor loan with companies like TFS Loans if you know somebody who trusts you enough to guarantee you’ll make the payments.
However, before you apply for a loan, it’s worth knowing the ways in which they can be beneficial. We’ll also offer some top tips with regards to finding the best loan a little later in this article.
Flexibility of Use
Unlike many types of loan, such as mortgages, that are given to be used for a specific purpose, personal loans provide you with money that you can spend on whatever you like. You might have come across an amazing deal on a vehicle that expires soon, or you might be desperate to embark on your dream holiday after university before entering the working world. Needless to say, it’s important to know as a matter of fact that you can afford to meet the required repayments each month, but a personal loan will provide you with money you can spend on just about anything.
Loans can Improve your Credit Rating
We’re all very aware of how important our credit ratings are. It’s vital to try and have a great credit rating if you want to secure low interest rates on things like mortgages or future loans as you progress through life. If you take out a personal loan and never miss a payment and pay it back within the agreed timeframe or even before, your credit rating has the potential to increase tremendously. However, you should still know that if you fail to make payments when agreed, are unable to pay off your loan, or only ever make the minimum required payment, your credit rating could worsen. Again, it simply comes down to being responsible with your loan to make sure you gain the benefits rather than experience the potential negative consequences.
No Collateral or Security Needed in Many Cases
Unlike taking out a loan specifically to purchase a car, or a mortgage to purchase a house, you might not need to risk any of your assets to take out a personal loan. As you already know, failing to make mortgage payments repeatedly can result in you losing your home, but the consequences are often much less severe with regards to failing to make personal loan repayments. However, as a quick disclaimer, you should not under any circumstances take out a personal loan if you feel you might not be able to afford the repayments. To protect your finances, you should repay the full amount of your loan within the agreed timeframe.
Loans are Often Easy to Obtain
In all honestly, bank loans are no longer as easy to obtain as they were before the global financial crisis. Naturally, the banks don’t want to risk lending money to people they feel might not be able to make the repayments. However, there are other ways to obtain loans without utilising the banks that make lending much easier. We’ve already touched on guarantor loans to a small extent above, but they generally are less concerned with your credit rating than bank loans. If you know somebody whom which you share mutual trust, they can guarantee your repayments to help your loan application be successful.
Loans can Help your Business Stay Afloat
If you’re running a business and are currently experiencing a slow period, a business loan could be just what you need to tide you over. You could choose to invest your loan into your marketing efforts in an attempt to win new customers, or you could simply use the loan to ensure survival until business picks back up again. Needless to say, the same advice applies to business loans as personal loans – you should be as certain that you’ll be able to repay your loan on time.
Finding the Best Loan
Now that you know some of the advantages inherent with loans as well as some of the risks involved, the following tips will help you find the best one, or you can click here for tips on taking out a personal loan in more detail.
- Check whether borrowing more than you intended could lower the interest rate
- Don’t apply for too many loans if you want to avoid lowering your credit rating
- Consider a credit card for short-term or small loans
- It’s a good idea to check your credit rating before you look to apply for a loan
- Make sure you read the small print
- Compare a range of loan providers
Loans exist to help people with money when they really need it, and they’re not always a bad thing so long as you’re responsible with the repayments and understand what you’re getting yourself into.