An Overview of Personal Loans:
As explicit from the name, personal loans indicate those debts, which are taken to fulfill your subjective requirements. The acquisition of personal loans is growing like an epidemic among all the banks and financial institutions in the United States. They refer to those lump sum debts that are processed between an officially recognized creditor and an individual borrower. A more precise definition of personal loans can thus be stated as a consolidation of various periodic loans into a single lump sum debt.
An Overview of Debt Consolidation:
Let’s assume that you have applied for various loans in the market, each of them having a variable rate of interest. In such a scenario, debt consolidation will help you to merge all the smaller loans into a single debt with a comparatively lower interest rate so that you can pay off the complete debt within the prescribed time constraint at ease.
It is a matter of fact that personal loans are applied for at various banks and through other creditors, and the stated reason varies from a personal vacation tour with family to an investment for the business expansion deal. However, one must not lose sight of the fact that unlawful, criminal acts due to the easy access of these debts have alarmed many individual borrowers to a great extent. Therefore, you should better undergo the below-mentioned pros and cons of personal loans before availing this opportunity:
Pros of Personal Loans for Debt Consolidation:
Naturally, the acquisition of a personal loan results in the elimination of the stress that you face in paying off several debts followed by variable interest rates. Thus, personal loans can be a solution to relieve that stress. Secondly, a predictable loan payment is much easier to handle and gives room to effective debt management as compared to the long periodic payments, which can lead to a mess. A debt consolidation plan usually forces the lenders to minimize the overall rate of interest and it helps you to maximize your savings. Furthermore, personal loans for debt consolidation help you to get rid of the overdraft fee, which is usually charged for the late submission of payments.
Cons of Personal Loans for Debt Consolidation:
It should be kept in mind that unsecured personal loans, while easier to get approved for, often have higher interest rates than other loans. If you’re in a place to get a secured personal loan, know that they will require collateral for the security reasons, which can at times be your house. In this way, if you failed to process the repayments to pay off the debt, it puts your home at stake. Therefore, it involves an element of risk, which can sometimes be stressful. If you lack collateral, your only option may be an unsecured personal loan.
Thus, it can be safely concluded that a personal loan with the sole purpose of debt consolidation can ensure a stress-free repayment period only if you are consistent in your monthly payments.