When searching for a loan, it's important to understand what type of loan you're looking for; many different types are available, each with their own unique benefits and considerations. So why are personal loans often a preferred option with so much choice available? At CreditLinks we're here to help you understand the true advantages of a personal loan over other loan types such as auto or home.
The Advantages of Personal Loans
Unlike many other lending types, personal loans are often unsecured and can be used for a wide variety of purposes. The funds from a personal loan can go towards anything from home renovations to planning your wedding. The flexibility also benefits you when faced with unexpected costs such as hospital bills or car repairs. Compare this flexibility to an auto or home loan, which are strictly tied to purchasing a vehicle or a home, and there's no doubt why personal loans are often favoured.
No Collateral Needed
As mentioned, personal loans are often unsecured, meaning they don't require any collateral against the loan. Collateral, which is required for a secured loan, can consist of your vehicle, your home, or other large ticket possessions. If you default on a secured loan, you risk losing your car, home, or other forms of collateral. Whereas with personal loans, the risk on your possessions in mitigated.
Interest Rates & Repayment Period
Interest rates will always be dependent on your personal credit history and score, however if you're in good credit standing, interest rates on personal loans can be quite competitive. Your rates will always be a little higher than if you took out an unsecured loan, but that is balanced by the reduced risk on your part. And an unsecured personal loan will always represent lower interest rates than a payday loan.
The repayment terms on a personal loan are often more flexible as well, giving you some level of choice in the loan that best fits your financial situation.
Quick Disbursal Times
The approval and disbursal times on a personal loan are often much faster than say an auto or home loan. The process of securing a mortgage on your home can be quite lengthy and involved, but securing a personal loan can be done in a matter of hours, or a few short days. This again supports the flexibility of use in case of emergencies or unexpected costs.
Conclusion
Personal loans offer unique benefits that set them apart from other lending solutions, often making them a go-to choice for borrowers. Whether it's related to the flexibility of use, competitive interest rates, quick funding, or the absence of collateral and reduced risk, personal loans are a clear choice for many.
Ready to Explore a Personal Loan?
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We believe in empowering everyone with the financial knowledge needed to make an informed decision when it comes to your financial needs. Looking to understand more about personal loans? Read our other blog about personal loan basics, here.