When you want to apply for a loan, always keep in mind both sides of the scale: the advantages and disadvantages of personal credit.
Personal loans are the solution offered by banks to finance any project you have. They serve, for example, to remodel your home, buy a used car, vacations, travel, finance your studies or health.
As a rule, personal credit is easy to obtain, with approval in 24 to 48 hours. And that makes them very attractive for anyone who needs or wants money quickly. But there are advantages and disadvantages to personal credit. In this article we show you which ones.
Main Advantages Personal Credit
Here are the main advantages of personal credit:
- Simple process and quick approval
- Available 100% online
- Credits for various purposes
- Financing up to €75,000
- Personal credit term up to 120 months
- Advance payment option
- Little bureaucracy compared to housing credit
- No guarantees and mortgages
Major Disadvantages Of Personal Credit
These are the main negative points and dangers of personal loans:
- Higher interest rates than mortgage loans
- Commissions and fees charged by some banks
- Penalties for non-compliance are high
- Credit dependency, with what is called a “credit spiral”, where people borrow back-to-back personal loans
The Advantages Of Personal Credit
Quick And Easy
The fact that you can compare and apply with the personal credit simulator makes the process very simple. And, with on-the-spot pre-approval, you can upload documents right away and get quick credit approval. Afterwards, the money is transferred to the account and is available within a maximum period of 48 hours.
100% Online
The entire process can be handled online. This means more confidentiality and also faster approval, as it avoids going to the bank and speeds up the processing and analysis of documentation.
Diversity Of Options
Car credit, vacation credit, university credit and health credit are just some examples of the projects you can finance with personal credit. In addition, you can even take out a loan for no specific purpose and use the money for various projects.
Little Documentation
With online credit, you only need your personal documents, proof of income and address and bank information. That is, much easier than housing credit, with property documents and public services and with the property valuation. Therefore, personal credit is less bureaucratic.
Flexibility
Amounts from €1000 to €75,000 and payment periods between 12 and 120 months (84 months in some cases) make this a very flexible financing solution. This gives you the freedom to adapt the amount and term in order to have a monthly installment within your possibilities.
No Guarantees And Mortgages
This is another benefit of obtaining personal loans compared to home loans. You do not have to mortgage the house or provide collateral through other assets.
Simulate and apply for credit instantly.
Disadvantages Of Personal Credit
Interest Rates
Unlike home loans, with a TAN normally between 0.8% and 4%, the TAN can exceed 10% in personal loans. This has two reasons, which are the more limited terms and the lower values.
Hidden Fees And Commissions
Always choose a bank that does not charge fees or require additional products, such as insurance and bank accounts or chargeable debit and credit cards. In that case, you may incur additional costs that are unnecessary.
“Credit Spiral”
Dependence on loans is a risk for many people, in a spiral in which they borrow to pay off other loans. But this disadvantage of personal credit can be eliminated if you take out consolidated credit .
If you are having trouble paying the installments, the best option is to combine the credits and consolidate everything into one loan. This reduces your effort rate and avoids problems with the Bank of Portugal, as you no longer run the risk of being on the “Black List of Credit”.
Tips For Responsible Credit
As you can see, there are advantages and disadvantages to personal credit. Therefore, it is essential to be aware of the risks and how to proceed after applying for a loan. Here are seven pieces of advice from Banco de Portugal for applying for personal credit:
- Assess whether you really need the credit;
- Decide on the most advantageous option between personal credit, car credit or credit card (to find out more you can call the number 210 201 170);
- Analyze the impact of the provision. That is, check your effort rate;
- Compare different credits. You can, for example, compare personal credit offers here ;
- Do not try to deceive the bank about your financial situation when applying for a personal loan;
- Carefully read the contract and the FIN. Clear all doubts before signing the credit;
- If you are offered other associated products (eg insurance), check their costs. Also, check the impact on performance if you cancel these products and services mid-contract;
Now that you know all the advantages and disadvantages of personal credit, don’t forget to compare all the loans before choosing the best offer. Knowing the best bank for your credit is simple: Simulate, Compare and Save!
