Before you start your comparison, it’s worth figuring out what type of personal loans may best fit your needs.
Secured personal loans
A secured personal loan uses an asset, such a car, as collateral for the money being borrowed. If you don’t keep up with your repayments, the lender can seize the security asset to help them recover their financial losses.
Secured loans often have lower interest rates than unsecured loans as lenders consider them less risky, as the borrower is motivated to pay back their debt to avoid losing their asset. This lower risk could also let you borrow more money, or raise your loan application’s chance of approval if your credit score isn’t the best.
Unsecured personal loans
An unsecured personal loan doesn’t have an asset attached as collateral, so lenders may consider them riskier. While this means that unsecured personal loans are more likely to have higher interest rates than secured personal loans, there's also no risk of losing your asset if you default.
Debt consolidation loans
A debt consolidation personal loan may be able to help you manage other outstanding debts by combining them all into a single personal loan. With just one regular repayment to manage, one interest rate, and one set of fees, you can simplify your budget and potentially save money.
For example, imagine you had two maxed-out credit cards and an outstanding car loan. You’re paying interest plus fees on each of these credit products. By taking out a debt consolidation personal loan, you can clear all these debts at once, leaving you with just one loan to manage. You’ll be charged interest at a single rate (which is often lower than the rates charged on most credit cards) and pay just one set of loan fees. This may cost you less per month than managing three credit products separately, and help simplify your budgeting.
Keep in mind that if you apply for a personal loan with a lengthy loan term, you may pay more in interest on your outstanding debts than you would by paying them off separately over shorter terms, even if your new interest rate is lower and your monthly repayments are cheaper.
Line of credit
A line of credit is a personal loan that functions similarly to a credit card. Rather than borrowing a lump sum to repay over time, you will be able to borrow and repay money up to a maximum credit limit, which is often based on the value of the asset used as security, such as a vehicle, or equity in a property.
Guarantor personal loans
It’s possible to have a family member or friend act as a guarantor on your personal loan to increase your chances of approval. By co-signing your loan, the guarantor accepts responsibility for the debt if you’re unable to repay the loan, making it less risky for the lender to loan you money.
You could a guarantor personal loan if you don’t meet the eligibility criteria for a personal loan on your own. However, make sure you only borrow an amount you can afford to repay. Failing to meet your repayments could strain your relationship with the guarantor as the financial responsibility for the debt will shift onto them.