The fast paced world of today demands continuous financial flexibility. It is not always feasible to shell out a considerable amount of money from your pocket, especially if you expect some long-term returns. The provision of getting a personal loan in USA offers you flexibility like none other. The process is very fast – you can literally get your money in a matter of days, and if you carefully research and take a stock of your finances before applying for the loans, the EMIs are quite manageable.

Depending on your requirement or usage, personal loans in the USA can be classified as:

  • Fixed Rate Loans, which are the most common type of personal loan with the rate of interest remaining constant throughout the entire loan tenure.
  • Variable- Rate Loans, where the interest rate adjusts at different intervals throughout the loan tenure based on the market condition.
  • Instalment Loans, wherein you borrow an amount of money and repay it at regular interval with interest over the tenure.
  • Convertible Loans, which provides a lender the option of converting the outstanding amount into equity position with the client’s company.
  • Payday Loans, which are expensive borrowing options, charges extremely high rate of interest and excessive fees. Used for emergencies, these are usually short-term loans secured against your next pay check.
  • Online Loans
  • Single Pay Loans


So, should you actually go ahead and apply for a personal loan? The answer depends entirely on the circumstances. If you need a lot of cash in a hurry, possess a credit card but do not have access to a considerable amount of asset, going for a personal loan is advisable. This is simply because of the reason that cash withdrawal using your card is much more expensive than taking a loan from a bank. However, if you possess assets like company stocks or shares, gold and properties, it might be prudent for you to take a loan in lieu of them.

Let us first look at the numerous benefits of obtaining a personal loan:

Flexibility: Personal loans can be used for numerous purposes – from meeting travel expenses, funding medical and educational expenses, purchasing cars, lifestyle equipment, and latest electronic gadgets or even for renovating your house.

Quick and Easy availability: The entire process of getting a personal loan is very fast. Forget the hassle of waiting for weeks for an approval. In some cases, you can actually get your money within 24 hours. All you need is to fill out an application form with the lending house/banks and the cheque would come to you in a matter of days. In some case, if you hold a savings account with the lender, the amount may also be credited to your bank account So personal loans are your best bets if you are looking for emergency funds.

Minimal documentation: Normally, getting a personal loan does not require much of documentation when compared to getting a loan for buying a car or a house. That is one of the reasons why the time to process the loan is minimal.

No need for collateral/ security: You do not need any kind of collateral asset as security to obtain this loan and the duration of the loan is much less when compared to home or car loan. So this is comparatively a low-risk option and this is the reason the personal loan is attractive for those who do not own a lump sum amount of assets.

Flexible Interest Rate for Account Holders: With some lenders, you actually have the option of getting a lower rate on the EMIs when you secure the loan with your share savings or certificate account. Flexible payout term is also available at times.

Despite their seemingly apparent attractiveness, personal loans do have their fair share of cons to make you think more than once before going for it. Prominent amongst them are:

High interest rates: Because personal loans do not require you to provide any security, they are regarded as a high-risk investment by the lenders. So, to offset somewhat their risks, they levy a very high rate of interest on these loans, when compared to a loan with collateral.

No provision for part payment: Most lenders do not allow you to partially pay off the loans; this actually means that no matter what your financial state is, you have to continue paying the loan for the entire tenure. This can actually work out to be expensive because your initial instalments go entirely towards interest payments.

Need for a good credit rating: You absolutely need to have a very satisfactory credit rating to apply for a personal loan in the United States. This is because for a creditor, these loans are quite risky, and in order to ensure timely payments of EMIs, they insist that their borrowers have a good credit rating. So if you have previously failed to pay up a loan and your credit ratings are poor, the chances are that your application would be rejected. So this loan availability is entirely subjected to strict eligibility regulation based on worthiness or credits of the borrower.

Even if a lender agrees to loan you the amount in spite of a poor credit rating, levy extremely elevated rate of interest end on a paltry principal when compared to a borrower with a good rating. They often impose an additional stricter repayment term on the borrowers.

So, before you venture out to get a personal loan at the spur of the moment, make sure to ask yourself these questions:

  • Is it the right time to take a loan?
  • Can I afford the EMI?
  • Should I borrow for a vacation?
  • What happens if I cannot pay it off?

Remember; refrain from taking a loan just because you can. Think wisely about your financial position and capabilities, else you are sure to be treading on a clear path to the crisis!

Image courtesy of nuchylee at