The Benefits Of Taking Out Personal Loans

Discover Personal Loans has recently completed a survey into personal loans in 2017. They found that 68% of people who took one out found that it enabled them to reach their financial goals. Furthermore, 70% said they felt more financially responsible as a result. Mainly, the survey showed the importance of trust.

“Trust in your lender is key when shopping for a personal loan. The first step to building that trust is education and there are multiple, credible sources where borrowers can gather information.”

The survey also looked at what the benefits of these loans were. The two main ones were revealed to be:

1. Lower interest rates, which was cited by 22% of those surveyed
2. Having access to funds quickly, which was cited by 21%

Other benefits included fixed monthly payments, fixed interest rates, and not requiring collateral.

How to Use a Personal Loan

The study also found that 38% of those surveyed have had a personal loan. Among these: 26% were for paying a major medical expense; 22% were to consolidate other debts; and 13% were used to set up a small business. The study also showed that less than 50% of them had more than $5,000 in savings. Hence, unexpected expenses often have to be covered by loans.

Interest Rates Matter

People think about a number of different things of importance when taking out a loan. The survey showed that:

• 43% wanted to know the interest rate before applying.
• 16% wanted to know the repayment terms before applying.
• 15% wanted to know the monthly repayments before applying.

Interestingly, all age groups believed that interest rates were very important, if not the most important thing, when considering a personal loan. Hence, they wanted to know how banks set interest rates.

“Banks are generally free to determine the interest rate they will pay for deposits and charge for loans, but they must take the competition into account, as well as the market levels for numerous interest rates and Fed policies.”

However, with other factors, there were significant differences between age groups. Specifically, those aged between 23 and 29 looked at fees (19%) and loan amount (18%) when choosing a lender. Yet those aged over 65 only looked at the fees or loan amount in 12% of cases.

Trust Is of the Greatest Importance

The most important consideration of all, it appeared, was trustworthiness. In fact, 18% of respondents said that they chose lenders based on how much they trusted them. This is something that has long been suspected, which is why PricewaterhouseCoopers has built a model on measuring trustworthiness of financial institutions.

“It is possible to measure and then proactively manage your trust levels. We did so by creating Trust Profiles for our Building Trust Awards finalists. These trust profiles are a significant part of Pwc’s Trustworthy Organisation framework, which tells us there are three different types of trust that consumers and investors look for.”

What the study showed was that people were influenced by their level of trust in a lender before applying for a loan. Additionally, it showed that people now educate themselves on their financial decisions. This means that they look for credible sources in a variety of locations to find out the actual status of different lending organizations. There has been a significant increase in the number of people who read financial blogs, for instance, and particularly if those offer important educational resources. Across the board, it appears that people want to be able to make informed decisions. They also want to feel that the lenders are customer-centric, focusing on providing information instead of selling products.