Personal loans are often used to consolidate high-interest debt or finance large, one-time purchases. But they can also be handy for managing day-to-day expenses during an emergency when your income has dropped or you don’t have cash savings to rely on. But there are a few things to know before applying for a personal loan to make sure it’s the right move.
Is getting a personal loan during a financial crisis a good idea?
There are some pros and cons associated with getting a personal loan during a financial emergency.
On the pro side, it may be cheaper to get a personal loan than charging expenses to a credit card. If you can lock in a low, fixed-interest rate on a personal loan, that may be preferable to the higher variable interest rate that credit cards typically charge.
You may also be able to borrow more money with a personal loan compared to a credit card. And an unsecured personal loan doesn’t require collateral or have the potential to trap you in a cycle of expensive debt, like a car title loan or payday loan might.
On the other hand, it’s important to consider the current lending environment.
Dave Meltzer, CEO of Maryland-based East Insurance Group said getting a personal loan may be more difficult as lenders have tightened restrictions. He also noted that it’s important to consider your ability to pay back a personal loan if you’re experiencing a financial crisis because you’ve been laid off or lost your job altogether…Read more>>