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When should I use a personal loan?


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Unsecured personal loans can really help in a pinch. If your savings are low and your car breaks down, such a loan can patch up your life. 

... continued below

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When should I use a personal loan? ... continued from above

Or maybe you're going to be buying a big-ticket item with a cheque and you need backup money to cover a short-term hole in your bank account.

Part of their convenience is how quickly they can be approved - usually in one banking day, three tops. 

Financial institutions don't care much about how you use an unsecured personal loan as long as you are a good candidate to pay it back.

The hitch is that because the borrower has no security, unsecured personal loans are more expensive. 

These days, even the new crop of low-rate credit cards can be cheaper than unsecured loans. 

And besides interest, watch out for annual service or maintenance fees on the loan that is either a flat fee or a percentage of the lump sum.

On the plus side, greater competition in personal loans from smaller financial institutions like the credit unions means there is a huge variation in the interest rates being charged - from 9 to 15 per cent.

Reader comments about this article

    By Lisa

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