5 Reasons to Apply and Secure a Personal Loan

personal credit

Do you currently have multiple loans or outstanding credit cards? And have you been having a hard time paying them off because they are all at high-interest rates, not to mention with different balances due? You're pretty much in big financial trouble then.

Things wouldn't become any worse if you apply and secure a personal loan, though. A personal loan has lower interest rates, predictable repayment schedules, and higher borrowing limits. It is easy to manage and can diversify your credit profile, as well. Need more information? Here's why you should apply and secure a personal loan.

Lower and Fixed Interest Rates

It's truly difficult to catch up with your remaining balances due to their high-interest rate. With a personal loan, you can enjoy lower interest rates than those of credit cards or payday loans.

Regardless of your financial strength, it's hard to look for credit cards with low and regular APRs that are below 10%. Several credit cards have lesser or no interest introductory rates for 12-21 months, but interest rates can reach from 10-20% or even higher after the intro period ends.

Another financial alternative that many would opt for is payday loans. They're pretty easy to obtain. However, they carry extreme financial risks. Many payday lenders tend to demand interests in excess of 400%. If you can't pay the exact amount you owed on the agreed due date, it leaves you much worse off than before.

Personal loans, on the contrary, incur lower APR rates. Typically, its interest rate ranges from 6-36%. For well-qualified borrowers, an unsecured personal loan can start to get underway at 5-6% APR. 

Easier Credit Management

You can consolidate your dues with the help of a personal loan. Debt consolidation means turning your outstanding bills together with your remaining credit cards balances into a single monthly payment.

Another benefit of personal loans is that it's easy to manage. Handling multiple credit card accounts can be quite a hassle due to different issuer policies, spending limits, interest rates, due payment dates, and many more.

If you're in need of more or less $10, 000 to pay all your outstanding balance, why not opt for a single, fixed-rate personal loan financed in a lump sum? It's much more convenient to manage rather than handling multiple credit cards with spending limits of approximately $3,000 apiece. You can do the Math. 

Predictable Repayment Schedule

Personal loans also allows you to be aware of your repayment schedule, too. Doing so can let you work out an efficient time frame to pay off your balances without facing overwhelming financial difficulties.

What's more, you would also be enlightened about the specific amount you have to repay each month right after the approval of your personal loan. Other credit information like the number of monthly repayments and total interest cost over the life of the loan will be provided by your lender to you right away.

Credit cards, home equity lines of credit, and other revolving credit lines lenders don't usually go the extra mile of providing repayment schedule to the borrowers. What borrowers constantly receive are only about their monthly payment due dates, required minimum monthly payment, and variable interest rates. More often than not, they aren't so predictable. 

Higher Borrowing Limits

The average credit line limits may range from $1,250 (subprime borrowers) to $10, 000 (super-prime borrowers) "only." However, in personal loans, you can borrow as low as $2,000 and as much as $100,000 in a single loan.

And yes, you can be eligible to borrow ten thousand grand or any amount, depending on several factors, as follows:

  • Current salary
  • Remaining balances
  • Credit score

For your credit score, lenders would love to offer personal loans to borrowers with credit scores of 680 or higher. But, let's say you have a bad credit score. Keep researching then. There are many lenders that offer borrowing options despite your poor credit score. Many of them are reliable and credited online lending platforms, like CreditNinja loans

Diversify Your Credit Profile

More often than not, lenders prefer clients with diverse credit profiles. A borrower with excellent credit is likely to find many creditors who are willing to issue a loan at a very competitive interest rate, which can still be subject to change with benchmark rates.

Taking out a single, fixed-rate loan funded in a lump sum loan means you're capable of paying an installment loan on time, making your profile diverse. Specifically, the benefits of personal loans, including debt consolidation, predictable repayment schedule, and credit management, can relevantly increase your credit score. 

Takeaway

After paying off your consolidated debt with a personal loan, avoid running up new balances on your credit cards as much as possible. Doing so adds to your debt and consequently stretches your budget thin. More importantly, it's always your responsibility to calculate how much you can practically afford to borrow.

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19 February 2020
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