What are the Risks and Benefits of a Personal Loan?

Part of making a financial decision is considering the risks and rewards of the decision you’re about to make. Some benefits outweigh the risks, and make sense in the goal of improving your financial life. 

Trapped in credit card debt? Getting a personal loan can help get your finances in order. Financial search engines like Fiona give you the freedom to get matched with a variety of personal loan options.

Let’s review all the details so you can determine if now is the right time for you to take out a loan. To help you, let’s evaluate the risks and benefits of personal loans:

If your credit isn’t in the best shape, you could wind up locked into a high interest rate. These rates can accrue a lot of interest quickly, which is when taking out a personal loan may be a bad financial choice.

A personal loan is not a good idea for those who don’t know what they’re going to use it for and whether they can pay it off. Qualifying for a personal loan doesn’t mean you have to or should take it—it just means your credit is in decent shape. However, if you don’t know where your income is coming from, and have no plan of how you’ll be able to pay your loan back, paying your loan late or even defaulting on it will harm your credit.

Some personal loans have fees or other hidden payments. The best financial search engines take out the guesswork about exactly how much loans will cost you by showing you all of the associated fees and interest rates with your loan. Never take out a loan if you aren’t 100% certain of exactly how much it will cost you.

If your credit is in decent shape, you can use a personal loan to get your finances under control. As long as you know your credit score, you can get matched with personal loans that are right for you.

Fixed interest rates and repayment schedules are some of the biggest benefit of a personal loan. You’ll be able to set up a monthly payment, which can help you maintain your household budget.

On top of the fixed interest rate and set monthly payment, a personal loan gives you a specific amount of time to pay back the loan. After you’ve used the cash from your personal loan, a fixed loan term makes sure you have a set schedule and time to pay it back, usually anywhere from 2-5 years. 

Personal loans are great for those who want to transfer or consolidate debt. If you have some credit card debt with high interest rates, a credit card debt consolidation loan will help you pay off that credit card debt and consolidate it into one tidy monthly payment. By consolidating debt in this way, you give yourself the chance to pay off the same debt sometimes with a smaller interest rate, which results in more money in your pocket over time. Additionally, debt consolidation with a personal loan can help you bundle payments from what may have been 2 or 3 high interest accounts to one low monthly payment.

Now that you’ve reviewed the risks and benefits of personal loans, you can assess whether now is a good time for you to take out a loan. If you’re on the fence and just wondering what offers are available to you, use Fiona to get matched with personalized loan offers without harming your credit score. Check out Fiona today to view some great personal loans available to you.