A personal loan is useful for managing large expenses and consolidating debt. These are unsecured loans meaning you don’t need to provide collateral to obtain one. Instead, lenders examine your credit history to determine if you’ll make a reliable borrower.
A personal loan offers great benefits, making it a good choice for people seeking credit. Here are a few reasons why personal loans could be suitable for you.
Personal loans don’t require collateral
A personal loan may be a great alternative if you’re worried about the risk that a car title or home equity loan poses to your property. Collateral loans may leave you worrying about the security of your possessions, especially if your income situation is precarious or you don’t have emergency savings to fall back on. There’s always a chance that you may lose your collateral if you miss a single payment.
On the other hand, unsecured personal loans pose no risk to your property. Late or missed payments result in credit damage but not foreclosure. With good credit, you can usually borrow up to around $15,000 at a time to take care of any expenses.
You can use the loan at your own discretion
Mortgages and car loans are examples of credit that can only be used to purchase a specific item.
Personal loans offer a lot more flexibility. You can use a personal loan to consolidate debt, make a purchase, or pay off any pressing bills. There aren’t many restrictions on what personal loans can be used for, making them useful in several situations.
You can choose the repayment terms that suit you
Depending on how much you’ve borrowed, lenders let you choose a loan term that suits your budget. Choosing a longer term means your monthly payment may be lower, but you may pay more interest overall. A shorter repayment term means you won’t pay as much interest, but your monthly payment may be higher.
You can choose a loan term ranging from 6 to 60 months (about 5 years) based on your needs and repayment ability. Remember that your installments remain the same throughout the repayment term.
Easy application and approval process
It’s easy to apply online or in-store since the application requires only a few personal details, such as your name, address, and income. Borrowers must be at least 19 years old, have a chequing account and a steady source of verifiable income to apply for a personal loan. Applicants may need to provide supporting documents, such as pay stubs and valid IDs.
While approval times vary by lender, some lenders may approve an application and disburse the funds within a day or two of receiving your application.
The bottom line
The versatility of personal loans and their easy application process makes them a great choice for anyone looking to borrow money. They may be the right choice if you’re a responsible borrower who makes timely payments and has good credit to support your application.
