Getting a personal loan can be pretty straightforward. It also has its pros. You can go in and apply for the loan, request a certain amount to borrow, and the issuer will then determine what amount you qualify for. There will be several factors that determine the interest rate of the loan, such as; credit score, ability to repay the loan on time, and the amount you are requesting.
Personal loans are considered installment loans, just like mortgage and auto loans. You pay the debt back in set payments over a specified period of time. Depending on your ability to pay on time, personal loans are not very flexible about payments, so that could be a positive or a negative aspect for you.
Below is a chart with some pros & cons of taking out a personal loan
On the other hand, there are some cons to taking out a personal loan. First, you have to apply for credit, which results in a hard inquiry documented on your credit score. That will ding your score in the short term. There is also an aspect of credit scoring that looks at your loan balances and how well you’ve been able to pay down on them. If you take out another loan, it won’t increase the gleam in the lender’s eye. Lenders also have more hesitations with no security in these loans, so the interest rate tends to be higher.
With every decision financially, there are positives and negatives. It just takes effort and an open mind in weighing the factors that are most important to you and your ultimate decision.