Advantages and Disadvantages of a Personal Loan

You are trying to relax, sipping your coffee, and trying to relax while there is a cool rainy Saturday morning. While you read the newspaper and browsing through some of the pages, you suddenly feel a drip of water on your shoulder. Looking up you see that your ceiling seems to be accumulating water from the rain. Then you come to realize that your ceiling has been due for repair for the past month already.

With household repairs, sometimes it is necessary to take on a personal loan especially when the amount that needs to be spent is for a need. Some people though would believe that taking on a loan is not the best of ideas. Here are a few things you may want to look at to make your own decision if a personal loan is good for you.

Advantages:

  • Source of Money. The use of a personal instant cash loan is often for a spending that requires a large sum of money. This amount of money may be something that cannot be earned easily or acquired right away. Getting a personal loan can be a solution for these large expenditures that need to be incurred.
  • Unsecured Loan. No collateral is needed when availing this type of loan. As long as requirements and documentation permit you an approval, proceeds of the loan can be received without any assets placed on lien.
  • With a personal loan, the borrower can use it for any purpose he may need the money for. There is no specific purpose that the proceeds must be used. The flexibility of getting portions to be applied to different needs and goals can also be done. You are not restricted to use the entire amount to a single purpose. A personal loan is often called a multi-purpose loan as well.

Disadvantages:

  • Long Term Obligation. A personal loan has a term between 1 to 3 years. It would be a long period to commit to especially when the salary being earned by the borrower is not much. Unlike payday loans, personal loans may take up to 3 years of committing to pay the amortization.

Higher Interest Rate. Because your personal loan is an unsecured loan, the lender will try to recover the principal loan amount as soon as possible. This can be done by increasing the interest rates.