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Are Personal Loans Bad

Personal loan can be bad and can be good sometimes. It will depend on the borrower’s reason of getting one and financial capability. Before getting a personal loan, it is essential to think about it thoroughly, and take into much consideration the economic status. There are possible severe consequences for failing to repay a personal loan. It does not involve fixed assets so there is nothing to surrender if unable to pay. It is crucial to get excited about the amount of money that is coming the way but also to think ahead of time. “How am I going to pay this?”, is probably the most critical question to answer.

The personal loan is not necessarily bad for the borrower. Some people tend to borrow an amount of money because they want to exceed more than what they can afford. The personal loan is not the best answer for impulsive desires for a specific item or events like the sudden family vacation or unplanned purchase for a car. Personal loan tends to have a high interest rate, and it should be taken into a lot of consideration before applying. It has the faster time of approval and requires very minimal paperwork, that is why it entices people. But don’t bite into the temptation if unsure how to repay it. Nobody wants to have a one-week family vacation full of fun; stress is relieved but a lifetime of regret and consequences after.

The personal loan can be a good solution during a case of emergencies like sickness and money on the savings is not enough, to save a person’s life, it would be a big help. It can also turn into a nightmare if not repaid well.

Difference Between Personal Loan and Bank Loan

First, the personal loan is unsecured while the bank loan is secured. The personal loan does not require collateral which involves fixed assets. The borrower, in an unfortunate case, occur, does not have to surrender any assets for the sake of repaying the loan. Unsecured loans tend to have lesser paper works and requirements. The personal loan also takes a shorter time of approval than the bank or secured loans. The banks find unsecured or personal loans to have the higher risk. Their resolution to lessen the risk is to give higher interest rates for personal loans. Therefore it is a good alternative to consider lowest interest personal loan.

Meanwhile, the bank loan is secured. It requires collateral which means applying for bank loan involves fixed assets of the borrower hence it requires more paperwork and verifications. Bank loan also takes a long process of approval. It takes days to apply for a bank loan while it only takes hours for the approval of personal loans. In an any unfortunate case occur that the borrower cannot repay the loan, he has to surrender his assets to the bank. Those fixed assets might be a car, a house, or any personal properties that can be surrendered as repayment for the borrowed money.

Personal and bank loan can be both a lifesaver in times of needs, but it will always depend on the borrowers' case. Personal loans will be a better solution if the borrower needs urgent money, or if he does not have much-fixed assets to use as collateral. On the other hand, a bank loan would be a better solution if the borrower would like a lower interest rate and also has a longer repayment period. The bank loan is even better for business if the money is guaranteed for a specified period.

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