“Your personal loan has been approved.”- fed up of such endless calls?
Trust me, I feel you! I’ve contemplated myself changing my number several times just to escape them. But hold up—before you hit that speed dial, let’s give this loan a chance. Hear me out, guys!
Personal loans aren’t all doom and gloom. Sure, they’re handy for fulfilling those small desires of yours without sacrificing life’s essentials.
But hey, it’s no green light for splurging on the latest iPhone!
In this blog, we’re diving deep into the this personal loan pool, exploring whether it’s a lifebuoy or a shark tank. Here, we’re going to dissect whether applying for a personal loan is the right move with pros, cons, and everything in between.
Let’s roll.
Before that, what exactly is a loan?
Trust me, you won’t regret skimming through the loan landscape as a whole no matter how many times you use the word in a day.
So, a loan is like asking your friend to lend you cash for pizza, expecting repayment with extra cheese. It’s basically borrowing money with the promise to return it, plus a little extra for the trouble. Here, you get the cash now, but you owe the lender back later,
Hence, it is safe to say that a loan’s got your back… for a price, of course.
In my opinion, loans are like the assorted treats at a candy shop, enticing you with options galore. You’ve got your classic home loans for those dream abodes, education loans paving the way for expensive higher studies abroad, and a whole array of other financial goodies.
Amidst all these there’s a special type of loan- the personal loan.
Let’s see how far this financial tool can carry us.
Finally, what is personal loan?
This type of loan is specifically designed for personal expenses, catering to individuals who need funds for various personal needs. Personal expenses can range from debt consolidation to covering unforeseen expenditures without compromising one’s lifestyle.
Now, are you thinking of splurging on personal expenses but short on cash? Before rushing to contact a bank or credit card company for a personal loan, take a moment to consider the following pros and cons.
These insights will help you make a well-informed decision regarding your financial situation.
Pros:
- The personal loan gives you a certain sense of flexibility.
- Here, one gets a lump-sum payment with fixed interest rates and fixed repayment structure. As a result, you can evade late payments with the help of its much easier management.
- Ever wished for a loan that gets approved before you even apply? Well, the personal loan grants that wish! Jokes aside, the personal loan gives you money fast in your hand.
- Here, you don’t need to show any asset as collateral while thinking of getting a such a loan.
- Say adios to sky-high interest rates! Compared to credit cards, personal loans offer rates as low as 12% or even lower if you’ve got a stellar credit history say (10.73%).
- With loan terms ranging from 2 to 10 years, personal loans make monthly repayments feel like a walk in the park. As a result, the monthly repayments are quite affordable.
Cons:
- For this financing option, the loan interest rate is not always the lowest. If your credit history is shakier than a Jenga tower, you might want to hold off on diving into these murky waters of personal loan.
- For those who have bad credit or very short financial history, qualifying for personal loan can be a bit difficult.
- Beware the lurking fees and penalties waiting to pounce like surprise party planners for such loans and these drive up the borrowing cost for an individual. The origination fees can soar up to 6%, you should know. Their can be some pre-payment penalties charged by the lenders in some cases as well.
- The personal loan repayment definitely puts a strain on the monthlybudget for next few months, even next few years. Honestly, with such loan repayments, you might find yourself cutting back on lattes and Netflix binges faster than you can say “budget breakdown.”
- The personal loan can rescue you from the clutches of high-interest debt but, one can’t deny that its itself a debt. It causes you to go deeper into debt. It’s like fighting fire with… well, more fire.
- It’s like trying to juggle flaming torches while walking a tightrope—exciting, but definitely not for the faint of heart with its higher repayments and a strict loan payoffs timeline.
- Last but not least, such a loan definitely increases the debt-to-income ratio for your profile resulting in drop in the credit. It’s a total party pooper of financial profiles making future car and home loans feel like distant dreams.
So, when is a personal loan right for you?
Applying for personal loan can be a great option for those –
- facing an emergency expense that screams louder than a cat stuck in a tree
- needing to consolidate smaller high-interest debts to a single debt
Hey, you think right now that a personal loan might just be your knight in shining armor! But, if your wallet has a tendency of being empty most of the days in a month due to over-spending, or if you are not eligible to bear the monthly personal loan repayments, stay away from it.
Take a beat, assess the urgency of your cash cravings before you dive headfirst into such a loan.
Final few things to consider
Well, you must consider that the personal loan has the potential to mess up your financial discipline keeping you away from finance goals of recent future. So, it’s crucial to take into account the following things.
- You should always have an alternative. If possible, explore other avenues of financing that might be more suitable for certain situations. For example, tapping into retirement savings could be alternatives to taking out a such a loan.
- Different lenders may offer varying rates based on your creditworthiness, so you must emphasize the importance of shopping around a lil for the best interest rates and terms before committing to such a loan.
- When evaluating the cost of a personal loan, consider all the associated fees such as origination fees, prepayment penalties, and any other charges that might apply.
- You must draft a detailed repayment plan before taking a personal loan so that you can easily afford the monthly payments without stretching the finances too thin.
- Such a loan should be taken responsibly only for legitimate needs and not for frivolous expenses.
- And, last but not least, it is always better to have an emergency fund in place to cover all the unexpected expenses instead of relying solely on personal loans.
Bottomline
Remember, your personal loan shouldn’t be the nosy neighbor crashing your perfectly planned financial party, stirring up chaos and wreaking havoc on your future finances. Keep it collected, and let your financial portfolio groove to a rhythm that sings sweet success, not sour surprises.
Trust me, your wallet—and your peace of mind—will thank you later! 🌟💼
