Personal loans, sometimes called unsecured loans, allow flexible use, offer short to moderate-term repayment options and quick funding.
Their versatility and convenience make them popular for borrowers of every financial standing. Let’s take a deeper look at personal loans along with their pros and cons.
How personal loans work
If you’re interested in a personal loan, visit your credit union in person or online, fill out an application, and pending approval, you can walk away with the lump sum you requested in one to three business days. You’ll need to repay the principal of the loan, along with interest, over the loan’s term, which can be as short as six months or as long as seven years, depending on your lender.
Unlike most other loans, like home and auto loans, personal loans are not intended to be used for a single, specific purpose. Once the money is in your hands, you can use the loan in any way you please.
Pros of personal loans
There are several distinct advantages to borrowing money through a personal loan.
First, as mentioned, personal loans give the borrower unique freedom to spend the funds in any way they’d like. Second, most personal loans are unsecured, which means there is no asset backing up the loan or at risk of being repossessed if the borrower defaults. Finally, obtaining approval for a personal loan tends to be a lot faster than it is for most other loans, and can happen in 24 hours or less.
Cons of personal loans
There are some disadvantages to personal loans that borrowers should be aware of before going ahead.
First, as unsecured debt, personal loans that are not backed by any collateral will likely have a higher interest rate than loans borrowed against an asset like a home or a car. Also, even if a personal loan is unsecured, in extreme cases, a lender can sue the borrower in court, obtain a lien, and then place the lien on the borrower’s assets. Finally, the amount of money you can borrow through a personal loan may be significantly smaller than the sum you can borrow through other loans.
If you’re ready to take out a personal loan, call, click or stop by Ideal CU today!
When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.