Advantages and disadvantages of a personal loan

A personal loan can be accepted for a variety of things and is therefore very versatile. In addition to the various advantages, there are, as certainly with most things, some disadvantages that should be considered when taking a loan.

Personal Loan

Although the terms ” personal loan ” and “private loan ” are commonly used interchangeably, these are two completely different loan types.

For example, a personal loan is a loan that is given by the banks for a variety of private purposes. A private loan , on the other hand, is granted by a private individual. This means that lending is entirely private and there is no bank in between.

The purpose-built personal loan

A personal loan can be used, for example, to finance your own wedding and / or your honeymoon, to purchase a new bedroom facility and to finance a particular hobby equipment. At the same time, one of the biggest advantages of personal loans is obvious: The loan amount can be used in many different ways, since this is a so-called purpose-based loan .

A disadvantage, however, is that in a purpose-bound personal loan from banks usually a higher interest rate is awarded. The reason lies precisely in the attachment of purpose: Thus, the credit institution can not fall back on any default in a possible default of the borrower on a certain security .

Assigned personal loan

The borrower may only use the loan amount for the purpose stated in the contract.

By earmarked personal loans, as the name implies, loans are understood to be provided by the banks only for the purpose of a particular purpose. This can be, for example, a home loan as well as a car loan.

An advantage of such a personal loan is that the loan is available at cheaper interest rates. Because here it is possible for the banks to use the respective purpose as collateral. Thus, for example, in a home purchase is often a registration in the land register , while in a car financing usually the vehicle registration remains with the bank until the loan debt was paid in full by the borrower.

However, the appropriation also causes a significant disadvantage: The loan amount may only be used for the purpose described in the loan agreement and thus for nothing else.

However, these are usually again “special” personal loans, as they are intended for a specific purpose only.

Loan amount and term

Here one is very flexible and can, to a certain extent, negotiate with the bank.

In a traditional personal loan, the range of possible loan amount is usually quite wide. For example, it is not only feasible to borrow smaller amounts, but larger sums, such as up to 100,000 euros, are also offered. However, this also depends on the respective bank.

Likewise, depending on the personal creditworthiness and the respective income, it is also feasible to negotiate the length of the term with the bank to a certain extent.

Thus, there are the advantages here that much is possible from smaller to larger loan amounts and also the term can be agreed to a certain extent. Accordingly, prospective borrowers benefit from a very high level of flexibility here.

Monthly Rate

A personal loan is due to the constant monthly installment very clear and easy to plan.

In the case of a personal loan, the installments to the bank must be paid regularly every month for the entire loan term. These are consistent installments, payments that are the same every month.

Only the initial or final rate may differ. However, these are only small amounts in euros or even cents. The reason for this is that, depending on the loan amount and the selected maturity, it is not possible to exactly divide it.

Accordingly, this is a clear, very easy to plan loan, in which no surprises are expected.

special services

The special services provided by the banks can save a lot of money and make life a little easier.

Depending on the bank, borrowers also benefit from a wide variety of special services. These include, for example, the possibility of free special repayments as well as the suspension of a monthly emergency, which arrives in an emergency, and a variable repayment rate .

It is therefore advisable to compare the various loan offers well in order to benefit from the various special benefits. After all, it is, for example, feasible to save a lot and to make the repayment of the loan much more pleasant.

requirements

Even with a personal loan , the borrower has to fulfill a wide range of conditions.

On the negative side, in the case of a personal loan, as with all other loans, there is also the fact that the prospective borrower has to fulfill various conditions in order to obtain such a loan. These usually include not only a safe, regular income, but also a good credit rating and a positive Schufa- information. Likewise, the banks usually pay attention to a German residence as well as a German checking account . The positive features of a loan, on the other hand, are that it is not necessarily necessary to forego such a loan even if there are problems in meeting the conditions.

For example, with the help of a guarantor or a second borrower, it is still possible to obtain the desired personal loan. However, of course, care must be taken here that the respective person then in turn meets the various credit requirements. In addition, the second borrower or the guarantor should be fully aware that he will be prosecuted by the bank in the event of insolvency of the actual borrower. This means that he, rather than the borrower, has to pay for the remainder of the loan.

As a guarantor or second borrower, the most diverse people come into question. For example, it is possible to use parents, grandparents or siblings here. Likewise, more friends or friends are possible. As long as the person concerned fulfills the respective requirements, it usually does not matter to the banks who is used as guarantor or second borrower . So you are very flexible in this regard.

Conclusion

A personal loan offers a variety of benefits.

All in all, a personal loan offers more advantages than disadvantages. For example, it is not only possible to choose between smaller and larger loan amounts, to discuss the duration and the amount of the installment with the bank, and to profit from an uncomplicated repayment of the installments.

In addition, with the help of such a loan, it is also feasible to fulfill a wide variety of wishes immediately.

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