Understanding personal loans is a good way to help you find the perfect lender.
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Personal loans are helpful in many different situations but can come with high-interest rates or drastically influence your credit score.
The benefits of a personal loan do outweigh the risks, especially if the loan is available at a good rate. Here we will discuss the benefits of taking out a personal loan.
Top 5 Advantages of Personal Loans
1. Quick Money in the Bank
Personal loans have a quick turnaround time after application – even as fast as 24 hours. Other loans, like home equity loans or car loans can take 3 – 4 weeks for processing. As a result, a personal loan is the best way to meet any urgent cash needs or cover unforeseen expenses.
If you have a good credit history then lenders will not have any issues with approving your personal loan application. For more information on personal loans, go to lightningloans.com.au.
2. No Collateral Damage
You can apply for secured loans or unsecured loans. An unsecured personal loan means that you do not have to provide any collateral for the loan to be approved.
This makes personal loans much easier to apply for than compared to other loans.
You should note that because of the lack of collateral, most personal loans are much higher risk for lenders, therefore their interest rate tends to be higher to mitigate this risk.
3. Versatile Loans and Loan Terms
Personal loan funds are incredibly versatile – you can apply for the loan no matter the reason. A single personal loan can also be used for various purposes, making it much less limited than other types of loans.
This versatility is just one of the reasons why personal loans are increasing in popularity.
4. Build Your Credit Score
If you have a low credit score, or some credit card debt, then a personal loan is a great way to build your score.
By taking out an affordable personal loan and repaying it on time, along with the pre-determined interest rate, your credit score will increase.
Your loan amount should always be less than your salary to ensure you can repay it without incurring more debt. Setting up a monthly payment system will ensure you avoid falling deeper into debt.
Personal loans can also be used to consolidate debt and pay off the debt on multiple credit card accounts.
5. Minimal Documentation and Easy Application
You can apply for personal loans online, with minimal documentation requirements. Application fees can be paid and all documents submitted through a lender’s website.
The application process is also fairly easy and convenient. The applicant can decide on a loan term and amount to cover their expenses.
The Best Reasons to Apply For a Personal Loan
- You can use the loan to refinance existing debts and bring your credit card balances to zero.
- Use the loan to finance a once-off big purchase, especially if the vendor does not accept credit cards.
- Cover any unexpected expenses, like medical emergencies or vehicle repairs.
- Finance your wedding with a loan.
- Expand or start up a new business.
- Make tax payments if you do not want to use your credit card.
Is There a Tax Benefit on Personal Loan?
Unlike with other loans, there is no tax benefit for personal loans. Exceptions can be made in certain cases, for example, if the loan is being used to purchase assets, used for business expansion, or applied to a home improvement project.
Exceptions are depending on the case, and different terms and conditions may apply to different loans.
Things to Keep in Mind When Going for a Personal Loan
Now that you understand some of the benefits of personal loans, you should keep certain things in mind to select the best option for you.
You should ensure that the amount you are applying for is within your budget to make monthly payments. You should also thoroughly read through all terms and conditions before applying for the loan.
It is important to shop around for lenders. Compare banks with fintech companies or private lenders. This will help you get the best interest rate to suit your budget.
No matter your financial situation, you can benefit from a personal loan. Although we only mentioned five benefits of these loans, there are plenty more that has made personal loans so popular.
As long as you meet the basic qualifications and you are willing to apply for a smaller loan, the chances are good you will get your personal loan funds in no time.