When should I use a personal loan?
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. 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 7.5 to 14 per cent.
Compare current personal loans, their interest rates and lending conditions.