Your total interest payments will be :
A personal loan is normally for a relatively small amount (often Ј1,000-Ј2,000). It is repaid relatively quickly - for example around two years and is normally unsecured. which means you do not need to risk any collateral to qualify for the loan. Personal loans are often the best option for people who are in a crisis situation in which they need money quickly to solve a financial problem, and cannot acquire it from family, friends or their own savings. In these circumstances, a personal loan is a much less expensive and sensible option than a credit card cash advance.
A personal loan is also preferable to having your car repossessed or your house subject to foreclosure due to missed payments, or having to deal with whatever other problems you may face in the future.
For situations that are not emergencies, personal loans are not really the preferred option, although they are still usually more advisable than using >credit cards. You should generally only opt for personal loans if you really need the money and cannot get it from your savings, family, home loan, or another source that charges less interest - in short, if your only alternative is a credit card.
Personal Loan or Home Loan?
Personal loans are far more expensive
than home loans. but there's one advantage of personal loans that should be considered: there is less risk involved, ultimately. Unlike car loans or home loans, personal loans are not normally secured - meaning there usually will be no collateral that the lender can seize if you default.
If you're in a financial crisis now, you have to consider the possibility that your problems may be added to by another financial crisis in the future. Therefore if your finances get worse and you cannot pay back your personal loan, at least no one will auction off your house.
How Are Personal Loans Better than Credit Cards?
If you go to a bank and ask for a personal loan, they may try to convince you that a credit card is a better option. But personal loans are probably better for you, because on average you'll end up paying less to the bank. Do your own research and stand your ground if pressured to apply for a credit card instead of a personal loan.
Similarities between Credit Cards and Personal Loans:
- Interest rates tend to be around 10% to 20%.
- Typically unsecured i.e. you don't have to put up any collateral.
- The amounts of money involved are typically a few thousand pounds or less (and sometimes even less than Ј250).