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For some of us money is like water slipping through our fingers. As soon as we get paid at the end of the month we pay our debt, pay our bills and buy our groceries. Sometimes, if we’re careful with our money, we get to spoil ourselves. But that happens less and less as time goes by. Maybe our debt becomes unmanageable. The car breaks down. Your house gets broken into. Emergencies, accidents, injuries and of course, more debt. Don’t worry, debt happens to good people everywhere.
Deciding to take out a personal loan is a big decision. The interest rates are always high and you know you’re going to be paying it off for an extended period of time. Paying a little extra each month should help. Be consistent with your repayments and do not miss a month. Personal loans can be a good thing if you apply them properly.
Some people do use personal loans as a form of debt consolidation, and it can be used that way. But, it is not the same thing. Personal loans can be used for anything. You also don’t need to provide collateral. Also, depending on your income, you have the option of obtaining a higher loan than you need for current or new expenses. Debt consolidation companies usually have experience and contacts to settle the debt on your behalf. This does not mean you are free of debt, it only means that all your debt is transferred to one company. So instead of paying several different creditors, you only pay one. Both are high risk loans and therefore have high interest rates.
There are advantages and disadvantages to both options. Consulting a financial planner in assisting you to choose which loan works best for you will only make your choice easier.