‍What are Personal Loans? What are the benefits and drawbacks of personal loans? 

 Personal loans are typically for a larger sum of money that is dispersed in a lump sum. These loans come with a fixed period for repayment along with a fixed interest rate. Personal loans are used for expenses such as medical bills or home repairs. To sum up, personal loans provide you with a larger sum of money up front. However, it's important to consider the interest rates and fees associated with personal loans, as they can vary depending on your credit history and the lender.

Pros of Personal Loans

Personal loans can be a great alternative to credit cards for certain situations. Here are some of the major advantages of using personal loans:

 

1. Lower interest rates: Credit cards come with a much higher rate when compared to personal loans, even less if you have a good credit score.  

 

2. Fixed repayment schedule: You know exactly how much you need to repay because personal loans have a fixed repayment schedule. With a credit card the repayment amount is purely dependent on your utilization. This can help you budget and plan your finances more effectively.

 

3. Debt consolidation: If you have multiple high-interest debts you can use personal loans to bring them under one roof. This will make the debt more manageable to repay on a monthly basis. This process is called refinancing. To learn more about refinancing click here. This can simplify your finances and potentially reduce the amount of interest you pay overall.

 

4. Flexibility in use: Unlike credit cards, personal loans can be used for a variety of purposes, such as home improvements, debt consolidation, or funding a major purchase. This flexibility can give you more control over your financial decisions.

 

While personal loans have their advantages, it's important to consider the potential disadvantages as well. In the next section, we will discuss the cons of using personal loans as a financial tool. Stay tuned for a comprehensive comparison between credit cards and personal loans!

 

Cons of Personal Loans

While personal loans can offer many benefits, it's essential to understand the potential downsides before deciding to take one. Here are some key disadvantages to consider:

 

1. Strict eligibility criteria: There are strict criteria you need to meet to get a personal loan. Some of those being a good credit score and a stable income. If you have a bad credit score and or inconsistent income, your loan request might be rejected. To understand all the reasons your loan might be rejected click here. 

 

2. Fees and charges: Personal loans often come with fees such as origination fees, late payment fees, and prepayment penalties. These additional costs can add up and make the loan more expensive over time.

 

3. Longer loan terms: Compared to credit cards the repayment period for personal loans is much longer. While this can make monthly payments smaller and more manageable it does mean you will remain in debt for a longer period of time. 

 

4. Potential for overborrowing: With personal loans, you can typically borrow larger amounts than with credit cards. This may tempt you to take on more debt than you can comfortably handle, leading to financial strain.

 

Understanding these potential cons will help you make an informed decision about whether a personal loan is the right choice for your financial needs. In the next section, we will explore the pros and cons of using credit cards. Stay tuned to gain a comprehensive understanding of both options.

 

If you need an urgent loan consider a loan against your LIC policy

Credit cards and personal loans have their individual pros and Cons. However, they both come with minimum eligibility criteria that many people do not meet. If this is you, do not worry, there are alternatives to consider. One of those alternatives is a loan against your LIC policy.

When applying for a loan against your LIC policy Mera Kal does not check any credit scores or income statements. Just provide us with a few details about yourself and your LIC possible and receive disbursement of your  loan. To understand this option in more detail click below.

Micah Parambi

March 21, 2024

Take a loan against your insurance policy today with us!

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