A personal loan  also known as Consumer Loan and can be used for a specific personal need. A personal loan can be used for your existing debts, vacations, school tuition, home improvements and car repair etc. The Personal Loan can be  borrowed from a bank or from private  lender.  A Personal Loan may not be secured. Personal Loans can either  secured or unsecured.

Secured Personal Loans have an asset set against them as security for the amount borrowed. The interest rate on secured loans tends to be lower than unsecured loans.

Unsecured personal loans require no property ownership or collateral for approval. The approval of unsecured personal loans is based on your credit history or employment status.

The amount of personal loan depend upon the purpose for which the loan is required.  The amount of personal loan is repayable over a period of from six months to ten years. Lenders charge interest rates on the amount borrowed as personal loan. Their rates can either be fixed or variable. If the interest rate is variable, the rate changes with market forces and could change the amount of your monthly installment.  Fixed rates offer more certainty but can be at a higher rate. It is advisable to compare the Comparison Rate of different lenders.

What is a Comparison Rate ?

Working out the true cost of a loan to enable you to compare it with another is often difficult. Most people just use the loan interest rate to compare different loans. This is a good start. However, the interest rate does not take into account other costs like establishment and ongoing fees.

From 1 July 2003, amendments to the Consumer Credit Code require lenders to provide Comparison Rates to make it easier for the consumer to compare one home loan, personal loan or car loan with another. A Comparison Rate takes into account the costs of setting up a loan including the interest rate, the loan establishment fee and any other upfront or ongoing fees that are definitely payable under the loan contract terms, over the life of a "model loan". This makes it easier for a customer to compare the true cost of different loans.