Did you know personal loans are the fastest-growing type of consumer lending across the United States? In the first quarter of 2019, the market for personal loans increased by 19.2%.
But why are consumers turning to personal loans? Check out these five awesome benefits of personal loans to find out.
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Do Not Risk Assets to Borrow Money
Are you uncomfortable using your assets as collateral to borrow money? Most people are, especially given the new tax law passed in 2018.
The new law no longer allows homeowners to deduct interest expenses from their Home Line of Credit (HELOC) as a home mortgage expense unless using the funds to purchase, build new, or significantly improve their home.
You will not lose your home or vehicle if you cannot pay back the unsecured loan, but the lender still has legal options to collect.
Lower Interest Rates Than Credit Cards
Getting a personal loan has lower interest rates than a typical credit card. A well-qualified borrower can expect to pay only 5% to 6% APR on an unsecured personal loan.
Even if a credit card offers a no-interest period when you first sign up, the rates generally increase to 10%, 20%, or even higher.
Finding a lender with low-interest rates proves much easier than finding a low-APR credit card.
Borrow More Than With a Credit Card
Are you interested in borrowing a large sum of money? The majority of credit cards come with a spending cap determined by the individual credit card issuer. They factor in information like:
- Credit score
- History of employment and income
- Repayments on other credit cards
- Recent delinquencies or bankruptcies
- Ratio of debt-to-income
Most credit card companies limit your credit line anywhere from $300 up to $10,000 for the typical borrower. If you need to make a big purchase or pay off a big expense, that may not be enough.
The borrowing limits on personal loans are much higher, depending on the lender. Many personal loan providers offer loans with a limit between $25,000-$30,000.
Know the Repayment Terms
Borrowing money with a credit card or HELOC means you cannot predict your monthly payment before receiving your bill. The minimum credit card payment changes every month depending upon how often you use your card. While the interest rate on your HELOC changes with benchmark rates.
Obtaining a personal loan means fixed repayment terms, interest rates, and monthly payments. When you sign the contract, you learn exactly what to expect for your payment every month, the total interest cost, and the number of payments you need to make to pay back the entire loan.
Are you paying down a few credit cards and several medical bills? Meeting that many minimum payments every month can pose a challenge. It’s also difficult to juggle, and you could end up missing a payment leading to penalties and more expenses.
Consolidating debt is one of the biggest personal loan benefits and a huge reason people take out personal loans.
Instead of paying multiple payments every month, you only make one payment. It’s often much smaller than the combined minimum payments as well.
Enjoy the Benefits of Personal Loans and Get More Great Financial Advice
The proven benefits of personal loans make them a smarter, safer choice than borrowing money with a credit card. So, the next time you need a large chunk of change, search for a reliable personal loan lender before opening up a credit card.
Want some more great financial advice?
The Financial section of the Wigily blog for tons of helpful articles on things like getting out of debt and finding good vehicle insurance.
Head on over today!