This Is One of the Biggest Benefits of Personal Loans

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Personal loans have many advantages, but a major one is that you find out your total costs and payment timeline upfront. Find out why this is such a big perk. 

There are many ways to borrow money. Many people use credit cards because they seem like an easy option. After all, once you get a card, you can just charge things on it up to your credit limit and get bills in the mail or online.

There’s another alternative, though, that may be a better option in some circumstances. Personal loans are often a better choice. And that’s not just because they offer lower interest rates than credit cards, although that’s usually the case.

There’s another huge benefit that comes with getting a personal loan that can make it a great way to finance purchases. Here’s what it is.

This huge benefit of personal loans could make them the right borrowing choice for you

One of the single biggest benefits of getting a personal loan is that you can get a loan with fixed costs and a fixed repayment schedule right upfront. There’s not going to be any surprises about how much your monthly payment is or how much your total interest costs are if you choose a fixed-rate personal loan. You’ll see the details of how long to pay and what your total financing charges are and can decide if you want to move forward with borrowing.

If you use a credit card, on the other hand, your card probably has a variable APR, which means your rate can change over time. If interest rates go up across the board, paying interest on your card can become more expensive. You’ll also find that the minimum payment required is not enough to repay your debt in any reasonable time period. If you pay only the minimum amount owed, it could take decades to become debt free.

Card issuers often include minimum payment warnings on your statements, which show the total interest costs and number of years it would take to become debt free if you paid only the minimum. But you aren’t going to see that until after you’ve charged purchases on your card and get your statement in the mail. You won’t have the information upfront about the total costs of the loan before you make a decision to move forward with borrowing.

Things can also get confusing with credit cards, as you might charge other items on the card before you’re done paying off past purchases. This can make it really hard to know how much you’ve paid — including financing charges — for any one item you purchased. This, in turn, makes figuring out whether charging that item was worth it or not.

This isn’t an issue with a personal loan. There are no surprises, there’s no mystery of how long you’ll be stuck paying, and you can go in with both eyes open.

Should you get a personal loan?

Getting a personal loan can make sense when you need to finance a purchase over time, if the interest rate you’re offered is reasonable and if the loan payments you’re expected to make fit within your budget.

It’s almost always best to pay cash and avoid borrowing, but the fact that you can understand the costs of a personal loan upfront makes it less risky than other types of loans. So if you need to pay something off over time, getting a personal loan is definitely worth considering.

To decide if borrowing using a personal loan is right for you, get several quotes online from some of the best personal loan lenders. If the payments and interest costs seem reasonable and you need to make the purchase, you can move forward with this simple borrowing approach.

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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