What is a potential drawback of using personal credit to secure a loan?

Using personal credit to secure a loan can indeed pose significant risks to an individual's financial stability. When personal credit is utilized, it often means that the borrower's personal finances, including their credit score and overall financial health, are directly tied to the loan's performance. If the borrower fails to meet payment obligations, it can lead to a deterioration of their credit score, making it more difficult to obtain future financing and potentially resulting in higher interest rates on future loans.

Furthermore, reliance on personal credit may lead to increased debt that can strain one’s personal budget, especially if there are unexpected expenses or if income decreases. This situation can create a cycle of debt, where the individual struggles to keep up with repayments, ultimately jeopardizing their financial stability.

The other options present benefits or outcomes that do not directly highlight a drawback of using personal credit in this context. Lower interest rates and guaranteed funding do not typically arise as drawbacks, while the prevention of loan approval is not a direct effect of using personal credit but rather can happen under various conditions of creditworthiness.