What are the benefits of obtaining a personal loan?

There are many ways in which a personal loan can help you with your finances. It can help you make large purchases, pay an unexpected bill, or consolidate debts.

Main points

  • A personal loan is an amount of money that a lender (a bank, credit union, or state-licensed lender) makes to a borrower (the borrower). The borrower has to repay the loan plus interest and fees, within a specified period of time.
  • There are many important benefits of getting a personal loan, including debt consolidation, scheduled payments, and being able to establish your credit history.
  • To receive a personal loan you need to review your financial situation, find the right lender for you, gather all the required information, and submit your application.

What Is the Benefit Of Obtaining a Personal Loan? Here below we will mention the multiple benefits of personal loans. We will talk about this:

  • What is a personal loan?
  • What are the benefits of obtaining a personal loan?
  • How do you get a personal loan?

What is a personal loan?

A personal loan is an amount of money that a lender (a bank, credit union, or state-licensed lender) gives to a borrower (the borrower), in this case, you. The borrower has to repay the loan plus interest and fees, within a specified period of time.

The annual cost of credit, which is the amount the borrower pays in interest and fees, is called the annual percentage rate, or APR. The APR includes interest and fees. Interest is the price you pay to borrow money, stated as an annual rate. Application-related costs, processing fees, and loan issuance fees. Depending on the lender and the laws of your state, the APR may include fees related to the loan. It could also include some additional products such as credit insurance. However, these fees can vary depending on who your lender is.

There are two types of personal loans:

Guaranteed personal loan

This type of loan requires that you offer some type of collateral (your car, your house, or something of value) to guarantee that you will repay the loan. With secured personal loans, if you stop making your regular payments, the lender can keep your collateral and sell it to cover part of your balance.

Unsecured personal loan

An unsecured personal loan does not require you to provide collateral. So if you can’t make your payments, your lender’s options are more limited than with a secured loan. Because this type of loan carries more risk for the lender, it often carries higher interest rates.

What are the benefits of obtaining a personal loan?

These are the five benefits of obtaining a personal loan.

1. Personal loans can be used for many things

When you get a personal loan, you can use it for different reasons. For example:

  • Cover unexpected expenses: Life is full of surprises, and a large expense cannot be predicted. When you suddenly need to pay an expense, a personal loan can be an excellent way to cover it.
  • Financing a large purchase: A personal loan may be the best option for making a larger purchase, especially if you qualify for an APR that is lower than your credit card. You can use your loan to make improvements to your home, repair your car, or even for a family vacation.
  • Consolidate Debt: Many unsecured personal loans can also be used to combine multiple debts into one, with easy payments and a lower interest rate.

2. A single personal loan payment is easier to manage than multiple credit card bills.

Keeping track of your finances and debts can be a headache, especially when you have different credit cards with different payment dates to remember. Between making payments, managing your balance, and paying interest, it can be difficult to stay out of credit card debt.

But when you have only one personal loan, you have only one payment to take care of. Having all the money you’ve borrowed in one place can make it much easier for you to control and manage your finances.

3. Personal loans offer scheduled payments that you can predict

While paying a loan, it is important to know some details:

  • The total amount you have to pay
  • How much money do you have to pay each month
  • How long will you be making payments?

When you receive a personal loan, all this information is given to you by the lender. This lets you know exactly when you owe and when you owe it.

4. Personal loans allow you to consolidate debts

Do you have multiple loans or credit card bills? You may be able to take out a personal loan at a lower interest rate to help pay off your other high-interest debt. Plus, you could lower your monthly payment by consolidating your debts into one personal loan payment.

5. Personal loans help you establish your credit history

Did you know that you can develop your credit history when you ask for a loan? For example, here at Oportun, we report your payment activity to national credit bureaus. If your lender reports your payments to national credit bureaus, and you make your payments on time and in full, it helps you establish a strong credit score. On the other hand, it is important to remember that if you do not make your payments on time and in full, this will also be reported.