A personal loan allows you to borrow a specific amount of money to pay for something. You then have to repay the money plus interest over an agreed timeframe, known as a term.

Personal loans can typically be used for some important life events and other big expenses, such as buying a car, debt consolidation, holidays, home renovations and weddings. It’s worth checking with the specific provider for details of what you may or may not be able to take out a personal loan for.

Personal loans can come with a fixed or variable interest rate and you can also choose to take out a secured or unsecured loan. The interest rate that you receive may be influenced by your personal circumstances, including your credit score.

Benefits of a debt consolidation loan

If you’re looking to save money, streamline your monthly payments and circle the payoff date on your calendar, then debt consolidation may be a good fit for you. Here’s a breakdown of the main benefits:
• Pay down debt quicker. Making the minimum payment on your credit cards can stretch out your repayment timeline for years. A debt consolidation loan may put you on a faster track to payoff.
• Save on interest costs. Generally, if you qualify for a lower rate than what you’re paying now, you’ll save money on interest costs. As of late October 2020, the average credit card interest rate was 16.02 percent, while the average personal loan rate was 11.88 percent.
• Simplify your monthly payments. It’s easier to manage one monthly payment than multiple payments with different due dates. This reduces your chances of missing payments, which is good for your credit.
• Repay on a fixed schedule. Many debt consolidation loans are fixed installment loans, which means you’ll know exactly when you’ll be debt-free. This can help motivate you while you pay down debt.