Choosing the right personal loan

RateCity Staff

RateCity Staff

( 2 min read )

Compare some of the best personal loans and lowest interest rates at RateCity.

What can a personal loan be used for?

Personal loans can be used for practically any legal function such as paying for tuition fees, debt consolidation, a holiday, a boat, kitchen renovations and even a car. Each lender has their own specific criteria, but as a general rule – if it's legal, you can find a loan for it!

How do they work?

Personal loans are a relatively basic kind of financial product. Consumers can borrow a specific amount of money which is required to be paid back with interest (in equal repayments) over the term of the loan.

Types of personal loans

  • Secured – tied to an asset (like a car or boat) which is used as collateral if you fail to make your repayments.
  • Unsecured – not tied to an asset and therefore offers no security to the bank if you are unable to make repayments.
  • Overdraft/line of credit – this is a personal loan with a difference. Similar to a credit card, the borrower can spend up to an agreed limit, and just pays interest on the outstanding balance each month. Unlike normal personal loans, there is no requirement to pay in full by a certain date.

If a loan is secured this means that it will be tied to an asset, which can be repossessed if you fail to make your repayments. Unsecured loans are collateral free and therefore tend to have higher interest rates.

Unlike other forms of finance, such as a credit card, personal loans are generally cheaper as on average they have lower interest rates and have the requirement to pay it back in a set period.

Use the RateCity personal loan calculator to crunch the numbers and work out the best options for you.

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