What is a personal loan?
A personal loan is money borrowed from a bank or lender that you pay back in fixed monthly payments over a period of time, usually with added interest charge. Most personal loans are ‘unsecured’, meaning they are not backed by collateral. A secured loan backed by an asset (like car or house) is usually cheaper, but you can lose the asset if you fail to make repayments.
Banks and lenders generally make their decision to approve or reject a personal loan application based on various factors, including credit score and debt-to-income ratio. Consumers with excellent credit health and score usually receive the lowest rates.
Why should I apply for a personal loan?
People apply for personal loans for many reasons, generally to finance something important they don’t have ready cash for.
Some of the most commons reasons include:
- To consolidate debt
- Financing home renovations
- To make a large purchase
- Fee payment for short education courses
- Unplanned emergency expenses
How do I apply for a personal loan?
Most major banks and lenders offer personal loans to individuals. Here are a few steps to get you started:
- Check your updated credit report for your credit score
- Shop around for personal loans
- Compare all options to find the most suitable one
- Contact the bank or lender that offers the best loan to apply