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What you need to know about Personal Loans!


July 18, 2019

Personal Loans

Every grown adult has probably had some type of financial hardship in their life. Out of those adults, a high percentage can trace those financial troubles directly to credit cards. Those amazing little cards that somehow have the power to start off as something so helpful and convenient also manage to have the ability to quickly turn into something that can be extremely harmful.

When a person ends up on the wrong side of their credit card balances, they may feel that there is only one way to get back on track financially- a loan. Everyone would love to simply get a loan from family or friends because there is no risk involved the way there is with a company. Companies have high interest rates and fees that can make your credit worse if you don’t pay on time. However, family and friends usually do not have the extra money that loan companies do.

When you’re in a pinch due to having high-interest credit card debt, a personal loan may be the best way to go. It is important that you go about the process of finding a loan in the right way. You should really have an exact goal and purpose for this loan. When it comes to a personal loan, you have a choice of two options you can use to help with your credit card debt.

The choice most credit card holders would make is to consolidate their debt with a long-term personal installment loan. These loans are usually designed to be paid back over a long period of time, ranging from one to six years. They are called installment loans because they must be repaid in the form of a predetermined payment that is due every month. They also have extended terms that make it ideal for anyone who wishes to have more time to pay at low interest rates.

Some believe one of the great things about loan consolidation is that it forces financial discipline to have to make that payment every month. At the same time, consolidating multiple credit cards into one payment and seeing the balance constantly go down can be quite a relief to many who have tried loan consolidation.
If you make your payments on time every month, your credit score will rise due to the way you are showing that you can manage your finances and pay back debt. People should make sure to keep old credit cards open because that history can help your credit score once the cards are in consolidation. Obviously, you should not get new credit cards because this can lower your credit score if you are already paying off a personal installment loan.

The other type of personal loan is also known as a cash advance or short-term loan due to their payment terms that range from 7-90 days. These loans are usually repaid in one lump sum amount at the end of the loan period. This type of loan is not a good fit for credit card consolidation because there are higher interest rates and a much smaller size, with a maximum of about $2,500. However, there are some instances when it is a better option to pay off credit card debt.

A short-term loan can be effective when used to ensure you have the money for your regular credit card payments. Then, you will not have to deal with a negative credit score or delinquent account. Another reason to choose this loan is if your credit is not so great because you would be unable to get the benefit of low interest with an installment loan. Once again, this type of loan does have risks. If you are not prepared to pay this loan amount in full by the required due date (coming soon after the loan), you should not get this type of loan. To miss paying such a high amount would leave you way worse off than when you started with only the credit card debt.

When it comes to finances and money, credit cards and personal loans can be a very valuable tool. Unfortunately, it is very easy to get into debt when you are so used to the convenience of a credit card. Personal loans do not work in the same way as credit; therefore, it is used to help fix whatever damage credit cards have created. However, this too is a tool that can start useful and end up harmful if you don’t manage your loan in a responsible way. If you choose to get a personal installment loan to control your credit card debt, be sure to do research and get all details about fees and interest rates so you are ready to make your loan be the financial turnaround you want and need.