Debt is not the roof of all bad things and it is true. You might hear from your parents or family members that personal finance is the bad option and you should not opt for it. But you must know that financially responsible folks use credit card options for everyday purchases, take out a mortgage loan, or even a finance car purchase with a secured vehicle loan or to purchase homes of your dreams they could never dream of paying it in cash.
There are two categories of personal loans one is secured and the other one is unsecured personal loans that are popular these days. As per the report from Experian, United States personal loan balances have crossed $273 billion in 2018 second quarter up from 11.4 percent from the 2017 second quarter. Personal loan balance growth has outpaced student loans, vehicle loans, credit cards, and even mortgage balances, which grew up under 10 percent. Fintech companies have user-friendly applications available in online mode and provide rapid funding with the space of growth.
Clients’ affinity for a personal loan is not at all surprising. As compared with different options available such as payday loans, credit cards and unsecured personal loans have different key benefits. Though less common, a secured personal loan has real value for eligible borrowers as well.
Let us take a closer look at the key advantages of unsecured as well as secured personal loans and some of the primary reasons you might feel using them.
Advantages of Taking Out A Personal Loan
Why you must consider a personal loan over the other options available to you? You must first see the advantages but don’t forget that the ideal credit product for any given circumstances depends on several factors that include income, credit score, your assets, intended loan, credit line purpose, or preferred repayment term.
Potential for High Borrowing Limits Than A Credit Card
As per the consumer financial protection Bureau’s data the consumer credit card market in the year 2017, the average size in 2017 of credit line was $10,000 for super-prime lenders to about $6,500 for main borrowers to about $1,250 for subprime lenders.
Every credit card has a spending limit that falls within a specified range done by the card network or the issuer. With low limits reserved for applicants who qualify for the credit card and higher limit for qualified applicants. Credit limits on a secured credit card are designed for clients with impaired credit ranging from $300 to the weakest applicant to $5,000 to the strongest one. It offers you with a no-annual charges cash back credit card ranging from $2,500 to more than $10,000. The ultra-premium credit card for travel has a limit of $10,000 to $ 50,000.
As per the personal loan providers, credit card issuers consider different factors to set their spending amounts. Most of them come from the consumer credit card data that includes:
- Employment and income history
- Credit score
- Frequency and timing of credit inquiries
- Debt-to-income ratio
- Delinquencies or recent bankruptcies
- Payment patterns on other credit accounts that are active
Personal loan borrowing is more generous compared to the other credit line limits. While borrowing limits may differ by lender, most personal lenders cap loan principals are $25,000 to $ 30,000 amount. Some might be more generous.
Potential for A Low-Interest Rate Than A Credit Card
The personal loan interest rate is lower than the interest rate of credit cards for comparable borrowers. You must make sure to find the best place to apply for a personal loan. The unsecured personal loan interest rate is normally 5% to 6% annual percentage rate credit cards with the regular APRs are below 10 percent regardless of the strength of the applicant. Plenty of credit cards have no-interest or low introductory providers that last 12, 15, 21 months but the interest rate may go up to 10, 15, 20 percent or even higher after the intro period gets over.
Collateral Usually Is Not Required
The most prime benefit of personal loan is that it does not need borrowers to put up collateral. The circumstances of defaulting on a personal loan are severe, but the loss of house, vehicle, or priceless family heirloom is not among them.
Easier to Manage Than Multiple Credit Card Accounts
A fixed-rate and single are the best place to apply for a personal loan. It is funded in a lump sum category that is much easier to manage than multiple credit card account with various spending limits, payment due dates, interest rates, and issuer policies. If you know that you need to get $25,000 amount why not to apply for a single personal loan rather than opting out for four or more credit cards with spending amount of $6,300.
Learn more about personal loan at EasyFind – instant loan guide.