Is a Personal Loan Right for You

We all need a cash infusion from time to time, for our dreams or for unforeseen emergencies. Obtaining a cash loan can be done in several secure, safe, and sane ways. Often the easiest way is through friends and/or family. And, or course, most people have at least one credit card that they can use when there’s a need. But have you considered the advantages and the convenience of a personal loan? According to lending firm LoanStar, “In some quarters a personal loan is not considered conventional enough, but when done right is can be completely safe and uncomplicated.”

So just how exactly does a personal loan work? It’s not a credit card, which charges you variable interest and comes with a fluctuating payment schedule that can be very confusing and arbitrary. With a quick personal loan you can borrow a prearranged amount of cash with one fixed interest rate for the length of the loan, and your payment schedule is also predetermined. There’s no unpleasant surprises, like a ‘balloon’ payment at the end of the loan period. Monthly payments are agreed upon ahead of the actual loan, so you know exactly what you’re getting into and budget accordingly.

Another plus for personal loans is that they normally come with a much lower interest rate. It depends mainly on credit scores and credit worthiness. The normal APR on a retail credit card has zoomed to more than 17 percent; but for most personal loans the APR is still at about 4 percent — that is, if you’ve kept your credit rating good.

Please remember that when it comes to personal loans, there are only two types — unsecured and secured. Most personal loans are unsecured, which means you do not have to offer any collateral in order to secure the desired amount of capital. Naturally, this is the most popular type of personal loan — it requires less paperwork and less interference from outside agencies. A secured personal loan, on the other hand, requires some kind of collateral, like your car, in order to secure the loan amount. Most people find it distasteful to put up an asset, but it should be mentioned that a secured personal loan usually has a much lower interest rate than an unsecured personal loan. So keep that in mind when mulling over your options.

One of the most popular uses of unsecured personal loans is for debt consolidation. People who have become mired in a high interest rate credit card swamp of debt can find it nearly impossible to pay down the interest, let alone the debt itself, without some outside help. Exchanging a low interest personal loan debt for a vampire-like high interest credit card debt simply makes financial common sense. Once this is done it becomes possible to make a personal budget that is not subject to the whims and sudden changes of high interest credit card payment demands. It can really bring peace of mind.

If you decide that working with a personal loan company is right for you make sure you check their originations fees and any other service fees associated with your personal loan before signing on the dotted line. These fees are usually very modest, but it never hurts to have everything out in the open before committing yourself. It makes for a happier and more productive loan experience.

David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.