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The Pros and Cons of Loans

Taking out a loan is a big decision, and it is one that can hugely affect your credit score. Taking out a loan having some Pros and Cons of Loans.

Whether you need a loan to cover an upcoming purchase, to finance something big like your wedding, or even just to clear any existing debt so you can avoid the high-interest rates, we have put together this article which includes a list of the pros and cons of taking out a loan

Here are Pros and Cons of Loans.

Pros of Loans


Loans give you much greater flexibility compared to other types of credit, which may limit what you are able to actually spend your loan on. For example, a car loan can only be used towards the purchase of a car and not to pay off your medical bills or for a holiday.

Lenders like Credit Ninja, for example, will often offer various different types of personal loans to suit your needs having some Pros and Cons of Loans, so you can choose the loan type that is going to be the best for you.

Lower Interest Rates

Credit cards come with high-interest rates, so one of the benefits of taking out a personal loan can be avoiding these. If you already have an existing debt to pay off, for example, a personal loan can be used to clear your current debt with its high rates of interest.

Although you would still need to pay back the personal loan, the interest rates associated with Money lender Singapore often mean you end up paying back much less overall by the time the debt is paid.

No Collateral

Collateral is another ‘con’ of credit cards, meaning that it is another tick in the ‘pro’ column for personal loans. This is because most unsecured personal loans do not require collateral in order for your application for the loan to be approved: no car, no home, no assets at risk.

With that being said, you will still face serious financial consequences if you default on your loan, so do not mistake this for being a lower risk or a less significant option because of this.

Easy to Manage

Some people can end up with debt in various places, which can be much more difficult to manage and therefore more difficult to get on top of in the first place. A personal loan, however, is different. As we have mentioned, they can be used to pay off your other debts.

This means that you can take out one personal loan to cover multiple separate debts, making it far easier for you to manage overall as you would be paying it back in one place.

Cons of Loans

High Fees and Penalties

Although the majority of personal loans will have lower interest rates than other types of credit loans, they can also come with some pretty hefty fees or penalties if you do not pay.

They are not always the lowest interest rate option, despite often being less than what you would be offered along with a credit card, for example. Some lenders will even charge you a penalty for paying off your loan too quickly or before the end of your loan term. Seems weird, right? Surely paying it off earlier is a good thing? Not if they are banking on the interest fees!

Higher Payments

Compared to other methods of credit, such as credit cards, the majority of personal loans will often require larger payments each month. Although this can be useful if you want to pay off your loan quicker, this can also mean you are slightly strapped for cash in certain months.

Higher payments can also be a consequence of consolidating all of your different credit card debts into one personal loan, as you will need to adjust the payments to within the loan term.

Can Lead to More Debt

Of course, whichever way you dress it up, taking out a personal loan is another way of getting yourself into debt. Even with the best will in the world and the best intentions to start with, you never know what may or may not come up in the future to interfere with your debt.

This could affect your ability to pay back your loan, leaving you with further debt and increasing interest rate charges, or it could also negatively affect your credit score.

Furthermore, clearing your credit card debts with the use of a personal loan knowing the proper Pros and Cons of Loans means that you will have your credit lines back at 0 again, which is too much temptation for some overspenders to resist, which can land them in trouble.