A personal loan is one of the most common types of loan that is being applied for by an individual. It can be used for several reasons. Mostly it is applied to household expenses such as repairs and improvements. It can also be used for large expenses like purchasing equipment or furniture. Getting a personal loan can prove to be great especially when the need for a large amount of funding is required.

Advantages:

  1. A personal loan is easy to apply for

Unlike specific types of loans such as mortgage loan or home equity loan, a personal loan grants more ease when being applied for. The process is much faster and cash is easily available. Because of its nature, a personal loan doesn’t require an agent and are often unsecured in nature. This is the loan you need for general purpose loans.

  1. Personal loan offer amount flexibility

Personal loans can range from as small amount that is equivalent to a monthly expenditure to an amount equivalent for a down payment for purchasing a car. The flexibility of the amount and the amount being granted depends on the evaluation of a borrower’s income and capacity to pay.

  1. Loan packages vary for the borrowers’ advantage

Being a general type of loan, the funds can be used for different goals and needs. Licensed money lenders often create loan packages that have offers that are specific to the lender. These offers can be for an advantage of a few, depending on who the lender is targeting as its market.

Disadvantages:

  1. Interest rates can be higher

Personal loans are often unsecured and prove to have higher interest rates. Due to non-requirement of collateral, a lender secures the risk by applying a higher interest rate for them to acquire the principal in the shortest time possible.

  1. Penalty for Pre-Closure

Since personal loans lenders earn from the interest that is being generated by the personal loan, they often charge high fees when you decide to close or pay off the debt early.

  1. Advance principal payments

When you do advance payments to lower the principal amount, it often creates an effect of higher fees paid as they charge a big amount on recomputing the loan amortizations.