What are the benefits of using a personal loan?
The benefits of personal loans are many and varied. Some of the most enticing advantages of this form of credit include:
A. Flexibility and Versatility
There's almost no limit to what you can use a personal loan for - borrowers have the freedom to spend the loan as they see fit. Common uses for personal loans include:
- Home renovations and major purchases like appliances and furniture
- Emergency expenses like medical bills
- Weddings
- Holidays
- Consolidating debt (which we'll explore below)
Personal loans can even be used as capital for investments, such as starting your own business. There's no limit to what a personal loan can fund.
B. Quick Access to Funds
Personal loans generally have a quick and easy application process and a fast approval process. At Instant Finance, for example, we offer:
- Fast online applications: You can apply for our personal loans from anywhere at any time. The application form is simple and gives us all the information we need to process your application fast.
- Same-day responses: You can expect a response from our team on the very same day that you apply, at which point we'll fill you in on the next steps.
- Money within 24 hours of approval: Once your loan application is approved, the money will land in your account within 24 hours, where it's yours to spend!
C. No Collateral Required
Personal loans can be 'unsecured', so they don't require collateral. This means that you don't risk losing assets like your home, a vehicle or an investment, if, in the worst-case scenario, you are unable to meet your legal obligations.
D. Debt Consolidation
Personal loans can simplify your finances by offering a handy way to consolidate multiple debts into a single payment. Rather than trying to keep up with several different rates, amounts and payment schedules, you take care of a single, simple monthly or weekly repayment.
And if your current debt includes credit cards and payday loans, this consolidation could end up saving you serious cash...
E. Lower Interest Rates
Personal loans may offer lower interest rates, and therefore lower monthly repayments, than comparable lines of credit such as some credit cards and payday loans.
While your specific rate will be determined by factors like the size of the loan and your credit score, you can generally expect the interest rate of a personal loan to be a few percentage points below the average interest rate of a credit card, and far below that of a high-interest payday loan.
Ultimately the lower interest rates of a personal loan can save you a significant amount of money over the loan term when compared to these other options.
What are the disadvantages of personal loans?
Personal loans aren't without their drawbacks. Some potential cons include:
Interest Costs
While personal loan interest rates can be lower than comparable forms of credit, you'll still need to pay interest in some form, and the rates will be higher than, say, a mortgage.
It's wise to estimate the total cost of the loan over the loan term so that you go into the arrangement knowing what to expect. How? Just use our handy online personal calculator!
Impact on Credit Score
Unsurprisingly a personal loan is tied to your personal credit score, so if you have issues repaying your loan, this may negatively affect your score.
This can result in long-term consequences, such as limiting your ability to take out credit in the future.
Potential for Overborrowing
Personal loans grant you easy access to funds, but this blessing can turn into a curse if you don't practise self-restraint, as overborrowing can lead to serious financial strain.
Before you apply for a personal loan, it's wise to ask yourself whether you need the money. If you do, what's the lowest amount that will get the job done?
As responsible lenders, at Instant Finance we tailor your personal loan to your needs and circumstances and we’ll make sure you don’t get in over your head.
When Should I Get a Personal Loan?
When exactly is a personal loan an appropriate borrowing option? A personal loan might be the right choice if you:
- Lack of available funds: If you need a lump sum of money for a specific purpose, from a holiday to an emergency expense, and you need it quickly, a personal loan is an ideal solution.
- Want spending flexibility: Unlike other lines of credit, personal loans don't place many restrictions on how you spend the funds.
- Appreciate predictable repayments: Featuring fixed regular payments over a set period, personal loan repayments are easy to plan and budget for.
- Want the option not to put up collateral: Unsecured personal loans mean you don’t need to provide supporting assets such as a vehicle or chattels as part of your loan agreement.
- Want lower interest rates: You may pay less interest on a personal loan than you would on a credit card or payday loan.
- Need to consolidate debt: Simplify your finances by combining multiple, potentially high-interest debts into one easy payment.
- Need to improve your credit score: A personal loan could help you build or improve your credit score by demonstrating your ability to repay a fixed-term loan.
Secure your loan today
In need of a personal loan? At Instant Finance we've spent over 50 years providing Kiwis with the funds they need to make their dreams come true.
Apply online today to secure your perfect personal loan.
FAQs
Is using a small personal loan to pay off credit card debt a good idea?
It certainly can be! This form of debt consolidation can result in lower monthly repayments on the same amount of debt and can often end up costing you less due to the potentially lower Interest rates.
What are the things to know about long-term personal loans?
Most personal loan providers, like Instant Finance, can provide different loan term options. The most important thing to understand about a long-term personal loan is the total cost - stretching a loan out over a longer period may mean you end up paying more in interest over the life of the loan.
Are personal loans better than payday loans?
The short answer: is yes. Payday loans are generally considered to be the most expensive way to borrow money, so if you have a choice between personal and payday, it's best to choose the personal loan.