Suppose you need borrow $10,000 to resolve a personal matter (for example, to buy a reliable used car to get to work, repay a student loan, or pay off credit card debt you incurred as a misguided youth). In your initial post, identify three possible options available to you and discuss the advantages and disadvantages of each.In response to your peers, compare your own suggested options with those of your classmates. Offer additional advantages and disadvantages that your classmates may not have thought of.
Response to kasey s
Good Afternoon,
I need to borrow $10,000 to pay off my current debt. However I believe the type of debt must be taken into
account, there is a difference between buying a car and paying off student loans and or credit card debt. If I needed a
car my first step would be to check my credit score with credit karma, while it is not 100% accurate it gives me a
general idea of my scores. I believe that is the best step because having a bad credit score can affect not only my
down payment amount but also the monthly payments and interest rates. If my score was decent, I would pick a
reputable bank that I have a current banking relationship with and apply for a car loan. The advantages are that I
have a relationship with that bank and hopefully that would make the process less tedious. The downside of picking
my own place to apply for a loan is normally when you go to a dealership, they shop numerous rates and banks for
you. By only doing one I may not be getting the most competitive rate.
If my credit score is not very high, I could go to a buy here pay here car dealership. The only advantage of
this is they usually approve anyone, and it would provide me a car. This option does have a huge disadvantage, these
places are meant for people who have bad credit which means the interest rate can be very high. It can also mean I
may pay more in interest then actually paying down the principal of my car. I could also refinance after a year and
try to obtain a better interest rate.
Depending on the type of debt someone could potentially use a credit card to pay off debt. In some cases
credit cards offer no APR for 12-18 months and sometime even longer, this would allow me to not pay interest and
pay directly towards the debt. The disadvantage of this is if I am not able to pay off the debt in the APR free period,
I could end of paying a high interest rate.
The next option could be a personal loan, in many cases individuals will now if they got approved or
denied for a loan. I went to Wells Fargo website and they have listed some of the benefits of a personal loan as
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Competitive fixed rate, fixed term, and fixed monthly payment
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No origination fee or prepayment penalty
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Relationship discounts for qualified customers with automatic payments
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Simple online application and funding process
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Get your funds, often by the next business day, if approved
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Loans from $3,000 – $100,000 and no collateral required
The website makes it very easy to apply for the loan, it will also allow the customer to compare different types of
loans and competitors loans. Like previously stated the largest disadvantages for this loan and many personal loans
can be the high interest rates. There is a large amount of resources out there to find the perfect option for the
situation.
Kasey Straub
Personal Loans. (n.d.). Retrieved from https://www.wellsfargo.com/personal-credit/personal-loan/
Response to nicholena
There are several options when it comes to borrowing $10,000. I believe a good option for paying off debt is a debt
consolidation loan. The reason this loan is an advantage is because you can take all of your debt and make one
payment with only one interest rate (Marquit, 2019). Having only one payment for all of your debt will make it
possible to pay off your debt quicker. A disadvantage to a debt consolidation loan is the interest rate is not always as
low as one would like. They bank knows you need to consolidate you debt so you are having issues paying it down
so the rate tends to be higher. A second option would be a secured personal loan. An advantage to a secured personal
loan is that the bank will except collateral to lower the interest rate, or raise the loan amount (Marquit, 2019). A
disadvantage to a secured personal loan is if you do not pay back the loan you will lose what you put up as collateral
as a payment for not paying your loan. Another option is an unsecured personal loan. An advantage to an unsecured
personal loan is the loan is given based on the borrower’s credit rate, meaning there is no need for collateral
(Marquit, 2019). A disadvantage to an unsecured personal loan is if you do not have good credit, the interest rate
will be higher or the loan amount may not be as high as the borrower needs, because the bank would worry about the
ability to pay back the loan.
Reference:
Marquit, M. (2019). Personal Loans- What You Need to Know. Retrieved from
https://www.thebalance.com/different-types-of-personal-loans-4767765
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