Have you ever heard of the term “neither lender nor borrower”? Sounds like big words of wisdom, unless you need the cash on your hip in a quick way. It’s always difficult to get around the question of the best and worst consumer loans in the United States, and in reality the choices you make are usually directly related to your desperation.
Let us help you navigate the troubled world of consumer loans in the United States so that you can make a decision based on common sense rather than necessity.
Best consumer loans in the United States
Making a mistake by choosing the wrong option can not only leave you in debt thousands of dollars, but the debt can increase dramatically and seemingly go on forever, making your life hell. Here are your top 3 options for consumer loans in the United States:
# 1 – Personal loans from friends
If you have wealthy friends with excess cash, taking out a small personal loan from friends or family is easily the best option. Assuming you are going to pay it off of course. Because no one wants to go into debt for too long with a friend or family member.
By taking this option, you will reduce the interest rate to the bare minimum. Many friends will charge very little or no interest, so as long as it is a small loan and you plan to pay it off within a reasonably agreed time, this is the best loan option for you. consumption by country. .
# 2 – unsecured personal loans
If you’re a younger person who doesn’t have a lot of assets to run or are a parent looking to borrow money to send their kids to college, an unsecured personal loan is a great option. . Personal loans are best suited for those who borrow small amounts up to $ 30,000.
A personal loan doesn’t borrow against anything of value, like a property, and while that means interest rates are usually higher, you won’t lose your property if you don’t pay.
Interest rates on personal loans average around 11%, but if you have a good credit rating and do a research, you might find something in the region of 5.5%, which is less than a credit card.
# 3 – re-mortgage your property with the equity in your property
If you’ve been a homeowner or have been paying a mortgage on a property for a while and need the cash, remortgage your property, or part of it, is a great way to inject cash. essential liquidity. Refinancing your home or getting a home equity loan is a smart approach as repayment methods typically last 5-20 years, giving you plenty of time to pay it off. And you still have a house at the end of it all!
Interest rates on home equity loans are generally in the range of 5% to 6%, but please beware of tax laws relating to deductibility if you are not using the money for home renovations.
The worst consumer loan options in the United States
Now that we’ve discussed the best options, it’s time to explore the worst consumer loan options in the United States so that you can avoid the common mistakes Americans make every year.
# 1 – short term payday loans
Have you ever been strapped for cash and so desperate that you considered a payday loan? Make sure you think twice before getting one. A report of Pew Charitable Trusts In 2013, he clarified that only 14% of Americans who took out payday loans could afford to repay the loans with monthly payments.
The report showed that payday loans are extremely unaffordable and on average leave borrowers in debt for an average of five months. Payday loans allow you to borrow money on hours that you have already worked but have not yet been paid for. While that sounds like a great idea for a short term loan until you get paid, 76% of these payday loans are renewals that last for months until you finally pay off.
Payday loan providers will also need to access your bank account in some way in order to be able to direct debit from your accounts. And you will be hunted down if you fail to make your payments. Beware of this option.
# 2 – Pawn shops
Although loans from pawn shops have a bad reputation, there are pros and cons. If you are looking for a short term loan and are ready to put an item as collateral, they are safer than payday loans.
However, in some states, interest rates on pawnshop loans can be as high as 37%, and other loan-related fees you still have to pay. The positive factors are that if you default on the payment, you will only lose your collateral and will not be hunted down by debt collectors.
# 3 – auto title loans
Auto title loans are short term loans where you have to put your money car or vehicle securities as collateral. These types of loans are generally for 30 days, which is a quick turnaround time if you can make the payment, but if not, they can sell your car to collect the loan.
Featured image from Shutterstock.