Personal loans are a great way to consolidate debt or finance a large purchase (like a home improvement project or a much-needed vacation). They are a quick source of cash you can use for many different reasons. However, before you decide to use a personal loan, it’s a good idea to consider the pros and cons of doing so.

Pros

Here are some reasons why using a personal loan may be the right option for you:

• Convenient. Applying for a personal loan is relatively simple — and you may be approved in less than 24 hours. Then, once approved, you can receive the funds in your checking or savings account quickly.
• Easy to Apply. Typically, you’ll need to show proof of income and your identity (among a few other things) to apply. Because there’s no collateral associated with the loan, your approval is based on your ability to repay the debt and your creditworthiness.
• Flexible. You can use a personal loan for many different purposes. For example, if you’re approved for a low-rate personal loan, it may be just what you need to consolidate higher-rate credit cards into one low monthly payment — helping you save money over time. Or maybe you just received an unexpected medical bill and need funds to pay for it.

Cons

While personal loans are a quick and easy way to get the financing you need when you need it, there are some things to consider before applying:

• Fees. You may be charged certain fees when you use a personal loan. For example, some lenders will penalize you for repaying your loan early. Make sure you review all the loan terms and conditions and ask questions if you don’t understand something.
• Higher Rates. Because these loans are considered to be a little higher risk, lenders will usually charge a higher rate than on a secured loan (such as a home equity line of credit). If you have good credit, you should be able to get a competitive rate. However, if you have a low credit score, lenders may impose stricter repayment terms (and higher fees) on your loan.
• Debt Management. While a personal loan may help you manage debt effectively, it doesn’t always take debt away. So, if you use a personal loan to consolidate credit card debt into one low monthly payment, you’ll want to ensure you don’t increase your balances again on those same credit cards. If you believe a personal loan is a good option for you, be sure you fully understand its terms and conditions. Additionally, compare personal loans with alternative options to make sure you have the right loan for your circumstances. To learn more about the personal loans available at Belgrade State Bank, click here. If you have questions about whether a personal loan is right for you, give us a call at 573-438-5200 for Potosi; 573-760-9000 for Farmington; 573-431-3999 for Desloge or 573-766-5315 for Belgrade.