A personal loan is when you are borrowing a fixed amount and agree to pay it back over a set time. As the borrower, you must pay back the loan in full, along with any interest and applicable fees. You do this by making regular payments, referred to as instalments.
Most financial institutions offer personal loans. Personal loans range in length from six to sixty months and are usually between $100 and $50,000.
You can use a personal loan for a wide variety of purposes. You can pay for home renovations, new furniture, or to consolidate high-interest debt. Unsecured personal loans are loans that do not have an asset backing them. These loans tend to have higher interest rates than secured loans.
Before signing up for a personal loan, make sure you understand the loan agreement. Review the loan amount, interest rate, term, payment amount and any fees you are required to pay.
Find out if it has a fixed or variable interest rate. With a fixed interest rate, the interest rate on your loan will stay the same during the entire term. Meanwhile, with a variable interest rate, the rate can change.
Beware of short term personal loans with high fees, known as payday loans. Payday loans can be convenient. They also prove costly due to their high-interest rates and fees.
Try not to borrow more than you need or more than you can afford to pay back. Otherwise, you could find yourself in financial trouble.