Weighing You Options: Understanding the Pros and Cons of Cash Loans

Weighing You Options: Understanding the Pros and Cons of Cash Loans

You recently had the wedding of your dreams, and now you are expecting a bundle of joy. Congratulations! This is an exciting time in your life, but it can be financially overwhelming. Just a few months after spending a considerable amount of your savings on a destination wedding, you need to do renovations to your home to prepare for a child. According to Home Advisor, it costs an average of $9,634 to remodel a bathroom, $22,011 to remodel a kitchen and $42,070 to build an addition. You were likely not prepared for these expenses, and you may be considering your borrowing options or delaying your renovation plans. Your first thought may have been to use a credit card. Credit cards are one of the most popular borrowing methods. According to the Federal Reserve, 65% of Americans applied for a credit card in 2016. While they are most popular, they often carry high-interest rates. Each week, CreditCards.com releases the national average APR, which is made up of 100 of the most popular credit cards in the country. According to their June 21, 2017, release, the national average credit card rate across all types of cards was 15.96%, with rewards cards carrying higher APRs to make up for the additional benefits they provide. A personal loan, also known as a cash loan, is often overlooked but has been recently growing in popularity. Securing cash loans can provide many benefits for those needing to make large purchases. Consider the pros and cons before applying for a personal loan.


  • You Don’t Need Great Credit: Most loans require a decent credit score, but personal loans can be acquired with a poor score. Some lenders are willing to offer personal loans to customers with credit scores of 600 or even lower. While these borrowers are likely to pay higher interest rates, the option is available. There are even a few companies that provide personal loans with no credit check. Click here to learn more.
  • Flexibility: Most loans, such as mortgages, auto loans, and student loans, can only be used for one specific purpose. A personal loan, by contrast, can be used for anything like vehicle expenses or home repairs.
  • You Don’t Need Collateral: Unsecured personal loans don’t require collateral. This makes them a good choice for people who don’t have anything of value to borrow against.
  • You Can Borrow Any Amount: With credit cards, you are capped at your card's limit. A personal loan allows you to borrow more for those costly expenses. Loans typically range from $5,000 up to $100,000.
  • Rates Are Reasonable: Interest rates for personal loans are often more reasonable than credit card APRs. For a borrower with a good credit score, interest rates for this type of loan can be as low as 5% APR, according to Credit Karma.
  • Easy and Fast: Compared to other types of loans, such as mortgages, personal loans are easy to apply for, and you can expect a quick decision, often within minutes.
  • State Legislature: Most states disallow charging interest rates above a certain percentage and limit the number of application and other fees a payday lending institutions can charge. This will protect you from absurd interest rates.


  • Fixed Payments: Although it is a smart practice to pay your credit card off as soon as possible, you are allowed to simply make the minimum payment. A cash loan requires you to make fixed monthly payments. If you do not make payments, you could have your collateral seized or be sued.
  • Higher Rates: For borrowers with good credit, personal loans typically offer lower interest rates than credit cards. However, for those with poor credit, a personal loan could cost as much as a credit card. Personal loans, especially unsecured ones, can also cost more than other types of installment loans, such as home equity loans.
  • Origination Fees: In addition to the interest, many personal loans come with an “origination fee” to cover the cost of processing the loan. This fee is typically between 1% and 6% of the amount borrowed. You must pay this full amount up front when you take out the loan, rather than paying it back over time as part of your monthly payment.
  • Prepayment Penalties: When you borrow money with a credit card, you can avoid paying interest by simply paying off the full balance as soon as you can afford it. However, with a personal loan, that’s not always possible. Many banks charge you a prepayment penalty if you pay off your loan early so they can make up for the interest they’re missing out on.
  • Potential for Scams: A final risk of taking out a personal loan is that not all loan offers are legitimate. Scammers sometimes offer fake personal loans applications in order to capture your personal information and steal your identity. In some cases, you are charged an initial fee, then they disappear with the money. This is known as an advance-fee scam.

Final Thought on Cash Loans

Where to Apply

There are several places to apply for cash loans. You can receive them through traditional banks, credit unions, online lenders like Upstart, or peer-to-peer (P2P) lending networks like Prosper and Lending Club. Online and P2P lenders are convenient to use, but some of them aren’t available to borrowers in every state.

Compare Multiple Offers

Before taking out a personal loan, compare offers from multiple lenders. Most lenders will let you check out their estimated rates and fees before you actually apply. Don’t just look for the lowest APR; compare the total cost of the loan, including fees. To save time, consider visiting an online loan marketplace, such as NerdWallet, where you can compare loan offers from different lenders at a glance. Regardless of the type of borrowing method you choose, be sure to weigh the pros and cons of each and compare multiple offers. The best solution for you will depend on your credit score, amount of cash needed, and personal financial situation. Check out our blog for more tips on personal finance.

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