5 Reasons You Should Not Apply for a Personal Loan

It seems like these days, advertisements for personal loans have infiltrated every type of media, from television and radio commercials to print ads. And in our culture of instant gratification and quick-fixes, the idea of a personal loan to solve temporary financial worries has been well-met by a consumer market that is, for the most part, naïve to the detrimental aspects of such loans. Personal loans, meant for people who otherwise cannot qualify for more traditional lines of credit, are structured with compensating factors that put the lender at a major advantage and that put you, the borrower, at a great risk. Personal loan shops are so eager to give money to people with bad credit histories because they have a lot to gain, and at your detriment. Need proof? Here are five reasons you should NOT apply for a personal loan:

1. Personal loans come with interest rates that will make your head spin. How does a thirty percent interest rate sound to you? Bad? Right answer.

2. Signing on the dotted line for a personal loan also means putting yourself at risk to lose a lot more than you borrowed. Personal loans always require that you provide collateral in forms that put you, the borrower, at a great disadvantage. Common personal loan requirements include: allowing them access to your personal checking account, signing over the title to your car, and handing over a post-dated check that the lender can use at will. 

3. There are no second chances when it comes to meeting your personal loan terms. Lenders who specialize in personal loans almost expect you to default on your loan payments, and their collection process is set-up accordingly. If you have to make a late payment, it will cost you – big time. Considering financially instability is what prompts most personal loans in the first place, the odds are not in your favor. 

4. The amount you borrow in a personal loan equates to a pay-back of up to three times that amount. Thinking of using a personal loan to pay that $200 electric bill? Well, that bill could end up costing you $600. Your best bet is to think again. 

5. You can’t be sure of what you’re getting into with a personal loan until you are sitting at the signing table. Most of what personal loan institutions offer in their advertisements are nearly impossible for the bulk of their customers to qualify for. This means that the interest rate and terms that attracted you to a personal loan in the first place are more than likely out of your reach.

Just as there is no pill that will magically melt away those extra pounds, there is no personal loan that will fix your financial situation. As a matter of fact, it could worsen your woes. Do yourself and your financial future a favor and find an better way than this “easy” way out.

About the Author: Holly is a writer and blogger with a passion for personal finance. She enjoys sharing money management tips with others and is also a contributor to a career guide for coding and billing schools.