Personal Loan

Personal loans can be used for many purposes, such as consolidating debts, paying for home improvements, covering a wedding or handling an unexpected large expense. Most are unsecured, meaning no collateral is required, although some lenders offer secured personal loans.

The borrower receives the full amount at the start and repays it in equal monthly instalments over a term, often one to seven years. The interest rate is usually fixed, so the payment stays the same throughout.

For example, a personal loan of 8,000 at 9% over four years would have monthly payments of about 199 and total interest of about 1,560.

Interest rates depend heavily on the borrower's credit history and income. Borrowers with good credit can get much lower rates than those with poor credit. Personal loans are often cheaper than carrying a balance on a credit card, which is why people use them to consolidate card debt. Before borrowing, it is worth comparing the APR, any fees and whether there are penalties for repaying early.