Staring down an ever-growing mountain of debt can be scary and cause sleepless nights for many people. Add in a few unexpected bills and it may seem as though you will never get out of debt. There are several different types of personal loans that may help, whether to pay an unexpected bill, or consolidate debt and finally see a light at the end of the tunnel.
For so many Americans experiencing financial heartache, there are a few different options that can provide relief: a personal loan or a cash advance.
First, what is a personal loan? A personal loan is typically an unsecured loan with fixed payments and fixed repayment schedule. A personal loan can be used to pay for anything, such as home improvement, unforeseen medical expenses or another emergency, or for debt consolidation.
There are two basic types of personal loans: secured and unsecured. A secured loan is based on collateral, such as a home or car. By using collateral, it lowers the risk for the personal loan lender and allows for a lower personal loan rate. An unsecured loan is based completely on the borrowers promise to repay the loan. These loans have a greater risk for the lender, which usually results in a higher interest rate.
What is a cash advance? Cash advance loans, or payday loans, are short-term loans that allow borrowers to receive a small amount of money quickly. For example, if a consumer needs $150 for a repair or an unexpected bill, they write a postdated check to the payday loan company for the amount needed, plus a fee, usually no more than $50. The company then gives the borrower the amount needed, usually less than $500 and keeps the fee when they cash the personal check the borrower wrote, on their payday.
Depending on your personal needs and how much debt you are working with, either of these options will help bring an end to the seemingly endless cycle of debt. A personal loan typically is better for consumers with a great deal of debt that they are looking to consolidate, whereas a cash advance loan may come in handy for an unexpected bill, especially if you know you will have enough money to repay it with your next paycheck.
Using a personal loan to pay off debt is one of the easiest ways to reach the end of the debt cycle. By taking out a personal loan, you can secure a lower interest rate, usually much lower than what a credit card offers, especially when you are carrying debt on many different cards. Plus, personal loan rates are usually close to prime, or even only a few points higher, compared with credit cards that most often run in double digits in terms of interest rates. By using a personal loan to pay off debt, you will end up saving hundreds or even thousands of dollars in interest.
Taking out a personal loan also allows you to make only one payment, instead of several. Remembering to pay only one bill is much easier than worrying about making each due date for each separate debt.
How do you shop for a personal loan? There are several different places to look for a personal loan: online companies, credit card companies and banks. Any of these personal loan lenders offer essentially the same product, you need to just examine all your offers thoroughly and choose the one that best fits your needs and look for the best loan rate.
Either option will help cure your financial heartache and give you much needed debt relief. Just be sure to do your homework and examine each option carefully before making a final decision.