Ahead of the holiday season, some shoppers may be tempted to take out a personal loan to pay off some of their debt. However, a recent report spells out the risks with these types of loans.
The report was published by the National Debt Relief, a debt negotiation company. It explains the advantages and disadvantages of using a personal loan to consolidate one’s debt.
A personal loan is used for personal expenses. The report says some of the advantages of using a personal loan to consolidate debt, include having just one loan instead of multiple. Personal loans can also be convenient for those looking to manage their finances in one place.
It sounds like a good idea. But Dr. Jim Lee, an economics professor at TAMUCC, says taking out a personal loan can be risky, especially if you’re already in debt.
“Living off your credit limit, it’s going to get you into further financial trouble,” Lee said.
Lee adds consumers should only take out personal loans if, “you think you’re capable of paying back and you have a steady income and if the interest is also lower.”
Lee also says the interest rate of a personal loan can be much, much higher. He recommends anyone considering taking out a personal loan, to consult with an expert or financial advisor.