Unsecured personal loans are so called because the lender requires no security for the debt. Secured personal loans use an asset to secure the loan, such as a new car. The money borrowed can generally be used for any legal purpose such as debt consolidation, home renovations, school fees, paying for a holiday or buying a car.
Personal loans are probably the most basic of financial products. Consumers borrow a specific amount of money and they need to then repay the debt with interest in equal payments over an agreed term.
Personal loans offer the general advantages of being cheaper than the closest alternative (credit cards) and the discipline of a repayment schedule.
Many personal loans allow the borrower to make extra repayments. Every dollar you repay above the required repayment shortens the life of the loan as well as the overall cost.
Questions to ask your personal loan lender:
- What is the interest rate?
- How can I qualify for a lower personal loan rate?
- Are there any application or ongoing fees for this personal loan?
- Is the personal loan interest rate Fixed or Variable?
- Can I make extra repayments or lump sum repayments to the personal loan?
- Is there a penalty for paying off the personal loan early?
- How can I check how much I have owing?
- How can I make my repayments?
- What other fees are there attached to my loan?