Pros and Cons of Taking Out a Personal Loan | The Simple Dollar - Deepstash
Advantages of Personal Loans
  • Personal loans are flexible forms of credit where they can help you reach various financial goals.
  • They allow the borrower to use it in every situation imaginable like emergency expenses or debts that you might have.
  • Personal loans can also be used to consolidate debt if you have many, into one loan and make debt less confusing.
  • It is one of the most popular borrowing tools on the market because it does not require collateral.

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As good as it sounds, personal loans have its own disadvantages such as:

  • Some personal loans have higher interest rates because since it doesn't require collateral and are unsecured, the risk of not paying the lender back is high; and
  • It can affect your credit score, either short-term or long-term negative effects. By adding debt to your financial profile, personal loans can and is going to affect your credit score.

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Before applying for a personal loan, ask yourself first:

  1. What are you borrowing the money for?
  2. What is your current financial situation?
  3. Are you in any capacity of paying the loan back?

Make sure you are never borrowing money for a personal loan based on an emotional decision.

Only after you look at your needs, financial situation and repayment plan should you consider moving forward with securing a loan.

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