3 reasons why personal loans are now a good borrowing option
Is a personal loan right for you?
- Personal loans allow you to borrow money for any purpose.
- It’s also a good bet as interest rates go up.
- Personal loans are flexible, usually pay off quickly and have a fixed interest rate.
It’s not uncommon to come across a scenario where you need to borrow money. Perhaps your aging car is on the way and you need to pay for the repair. Or maybe your air conditioner just broke, or you have another big purchase that you really can’t put down.
There are various borrowing options you can look out for when you need money, from raising your home equity to running your cards on credit cards. But here’s why a personal loan may be your best option right now.
1. You gain great flexibility
When you take out a mortgage, you must use the funds on the loan to buy a home. Personal loans work differently. As they are not secured by a specific asset, you are not limited to using them to purchase a specific asset. Instead, you can take a personal loan and use your proceeds for any purpose, be it home repair or vacation.
Of course, the same flexibility can get you in trouble. It is generally not a wise idea to borrow money to pay for your trip or anything else that is not necessary. But right now, many people are struggling with inflation to cover the basic cost of living. If you take out a personal loan, you can use the money to eat on the table, pay for gas, or pay utility bills.
2. They tend to close quickly
When you take out a mortgage, it may take several months to finalize your loan. But when you apply for a personal loan, you will often get your money within a few days. So, if you need cash in a pinch, it’s wise to look for a personal loan.
3. They have a fixed interest rate
Some loan products, such as credit cards and HELOC (Home Lines of Credit), have a variable interest rate. This means that the amount of interest you start paying off your debt can change over time.
With a personal loan, you can block a fixed interest rate and pay off the debt in equal installments. You’ll have predictable monthly payments that you’ve been waiting for, and that’s especially important now.
The Federal Reserve raises interest rates in an attempt to slow down the pace of inflation. And it won’t be a surprise for more rate hikes this year. This could make credit card and HELOC loans more expensive. But if you close a personal loan now, the rate you start at will be the same that you will have to adhere to throughout the loan repayment period.
No matter why you need to borrow money, it pays to look at a personal loan as a viable option – especially if you have a large loan. But even if your credit score requires work, you may still qualify for a personal loan, albeit with a higher interest rate. If your credit score is high, you may find that a personal loan is the most affordable loan option today.
The Ascent’s best personal loans for 2022
Our team of independent experts has studied the fine print to find selected personal loans that offer competitive rates and low fees. Start by looking at The Ascent’s best personal loans for 2022.