Consumer loans are loans provided to private individuals for the reason of purchasing consumables, hence the name. A commercial loan is when a bank loans money to a business; consumer loans have fewer restrictions than commercial ones and lower collateral value. They require a bank or other official lenders to extend a line of credit to be used for personal purposes, and the regulations are considered much tougher when compared to commercial. The Truth in Lending Act was established in 1968 to provide some protection to consumers as it made it illegal not to disclose key terms in credit agreements and disclosure of the full costs. Secured and unsecured personal loans are gaining a lot of popularity in recent years. Apparently, what’s offered by consumer loans is the reason for its growth in popularity, even when compared to the dominating credit cards and payday loans available today.
In this article, we’ll be giving you our top 8 reasons why we believe these kind of loan is the best option for you.
1. No Collateral
Almost all of them don’t require collateral. This means that you don’t have to risk the bank taking over your house, vehicle, or other valuable properties when you default on a loan. According to https://instabank.no, the reason most of these loans have a high-interest rate is that the security restrictions are quite low. This can be considered a double-edged weapon as defaulting on unsecured loans can have some legal consequences. The flexibility of the loan can make up for it as you’ll be able to think freely with the money in your account or invest it properly.
2. Higher Limits than a Credit Card
The average credit line obtainable by a credit card ranges from $1,250 to $10,000 depending on the type and credit of the borrower. Applicants for the credit card are given credit per their qualifications. Even if you happen to have prime qualifications and credit scores, the credit line limitations can still end up causing a bottleneck. Consumer loans are known to be more generous than credit cards when it comes to borrowing limits. Similar to credit cards, personal or consumer loans vary according to the issuing bank. The lowest average in the US is around $25,000 while the highest was $100,000.
3. Reasonable Interest
The plague of loans is the interest rate; it can easily start piling up on you, and you end up under a huge pile of debt. The interest rates on consumer loans are considered to be one of the lowest. Unsecured loans usually offer a 5% interest rate for the most qualified borrowers. Most credit cards enforce an APR of more than 10%. Even though you may be tempted by the no-interest introductory offers, once the time is up, the interest rate will spike and cause you a lot of headaches. Getting a personal loan with a known low interest rate from the get-go is the option you can depend on in the long run.
4. Zero Restrictions
Most types of loans have a standard restriction that limits them to be used in certain fields or directions. A student loan, for example, binds you to use the money on study-related investments while an auto loan limits you to vehicle financing. A consumer loan operates differently; once your loan is accepted, you’ll be free to do with the money whatever you want. You can purchase consumables, invest it, or even lend it to someone in dire need. This kind of flexibility is almost exclusively offered by consumer loans alone.
5. Easier Management
When you’re looking to open more than one credit line to be able to achieve a specific goal in mind, you’ll start getting confused by the different spending limits, interest rates, due dates, and policies. Since these loans can provide a bigger sum of money than a few credit cards combined, then why not apply for one to make the process of managing a single lump of money easier. You’ll know exactly all the important details, and you won’t be worried about swapping dates by accident all the time.
6. Stable and Constant Repayment
Consumer loans are usually installment loans that have a constant interest rate, repayment policy, and monthly payment values. Once your loan is approved, you’ll be acquainted with accuracy the amount you’ll need to pay, the exact date of repayment every month, the number of repayments you have to make, and total interest costs for the duration of the loan. You’ll notice that this provides a clearer view of the repayment process more than credit line resolutions which have a lot of variables that can make it quite unpredictable.
7. Perfect for Unplanned Major Expenses
When you’re in an emergency, you don’t want to waste your time shopping around banks and trying to squeeze the best deal out of them. A consumer loan provides you with access to quick cash for the most unexpected situations like medical bills, emergency repairs, or urgent home repairs. It’s quite hard to be able to cover those expenses with a credit line alone. Most online lenders offer to fund you the entire amount on the same or next day of the offer’s acceptance.
8. Jump Starting a Business
Some people may spend a lot of time planning out how they’re going to make their business become a dominating force in the market, yet they lack the capital to fund its first days. A commercial loan requires a business owner to jump through quite a few hoops which would be pretty hard for an entrepreneur to navigate. A consumer loan can fund you through the initial startup costs and get you over to the coast safely.
Consumer loans are quite a powerful tool in the hands of those who know how to use it right. Whether the loan is secured or not, you need to have the financial responsibility to be able to make it through its payments. It’s become quite easy to obtain one these days, and honestly, it would be considered a waste not to take advantage of it.