Plenty of people are afraid to have debt. They are not comfortable with the idea of borrowing money. But you do not have to worry about loans if you are responsible enough to pay for them. Personal Loans can actually offer plenty of benefits for your finances.
Unlike using credit cards or payday loans, you can get more perks if you apply for a personal loan. Here are some of the key advantages you can get if you consider this type of loan if you need some funds for various purposes.
Possible Higher Borrowing Limits Than Credit Cards
According to the Reserve Bank of Australia, the latest average credit card limit in Australia is approximately $9,500. The card’s spending limit depends on the issuing financial institution. Those with lower qualifications usually have lower card limits, while those with good credit standing and the highest qualifications can enjoy higher credit card limits.
However, the limits for personal loan borrowing are generally higher than credit cards. Some lenders can allow you to borrow $5,000 to $50,000 unsecured personal loan that you can pay in 18 months to seven years. It is better than any credit card payment terms.
Lower Interest Rate than Credit Cards
Personal Loans have lower interest rates than most credit card interest rates for most borrowers. On average, Australia’s unsecured personal loan interest is anywhere between 5% to 6%. Meanwhile, the average Australian credit card interest rates are at least 8.99% to 14.99%. It can significantly affect the amount you need to pay for your monthly dues. So if you want to spend a lower interest for repayment, you must consider borrowing a personal loan.
Collateral Is Not Always Necessary
Applying for unsecured personal loans allows you to submit your application without collateral. While this option may require you to pay a higher interest rate than secure loans, it can still protect your valuables or other essential possessions from being repossessed by the bank if you miss out on paying your loan.
Anticipated Repayment Schedule
The lender will issue a fixed interest rate, repayment terms, and other monthly payment schemes when you apply for a personal loan. Once approved, the lender will explain how much you must repay every month. They will also let you know how many monthly repayments you need to pay and the total amount of your interest costs.
On the other hand, credit lines like credit cards or home equity lines may not be as predictable as personal loans. It only comes with consistent monthly payment due dates, but your required minimum monthly payment and interest rate are usually subject to changes depending on the benchmark rates.
Longer Repayment Terms
Most of the time, personal loans are payable in two to five years, but secured personal loans can allow you to pay longer. On the other hand, other alternatives like pawnshop loans or payday loans have shorter repayment terms. These types of loans may require you to pay in 16 days up to one year. Applying for personal loans definitely have a lot of perks. If you managed to secure this type of loan, you could use it to refinance your existing debt, have funds for significant expenses like home improvements or vacations, or pay for unexpected expenses like hospital bills. You only need to secure all the requirements and avoid missing out on your repayments to ensure that they will never affect your credit record.
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