(FinancialHealth.net) – Personal loans became the fastest growing debt in the United States last year. It grew to $305 billion in the first half of the year, and it outpaced the growth of credit card debt by double.
YouTube’s “MoneyCoach” channel explains the intricacies of personal loans:
If you’re considering a personal loan, you should also know risks and rewards before speaking to a lender.
Risks
Some of the disadvantages are:
- The loans often have varying interest rates depending on the borrower’s credit score.
- The inability to repay a loan leads to lower credit scores.
- Added fees often increase the repayment amount.
- Secured loans may require collateral that would be forfeited if the borrower defaults.
Rewards
Taking out a loan isn’t always a bad idea. Here are some of the advantages:
- Borrowers can consolidate debt.
- Using loans for home improvements could increase the property’s resale value.
- Paying a loan on time will help improve a person’s credit score.
For people with bad credit, a personal loan isn’t always the best option. Someone with good credit may benefit from one if they use it for home repairs or other expenses. Both should consider interest rates and their ability to repay.
~Here’s to Your Financial Health!
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