Personal loans can be used for almost anything. From purchasing appliances or furniture to paying for medical expenses, its purpose really does depend on what you need the loan for.
As versatile as a personal loan is in terms of what you can use it for, there are some fixed aspects of a personal loan, like the repayment terms and interest rates. In this blog post, we’ll break down how a personal loan works and what you can use it for.
What is a personal loan?
A personal loan lets you borrow money to pay for personal expenses, then you repay the borrowed amount over time. Personal loans can be used for a variety of purposes but it must be paid back over a set term (known as your repayment term).
How does a personal loan work?
There are a number of banks, credit providers and online lenders, like FASTA, that offer personal loans. These personal loans can either be long term or short term, and both have their own benefits.
Personal loans will often always come with these three terms:
- Repayment term: the amount of time you have to repay the personal loan. This repayment term will depend on whether you have a long-term (in which case, the repayment term can be from 12 months to a few decades) or a short-term loan (in which case, the repayment term is usually less than one year).
- Your monthly repayment: the total amount of money – including interest and any fees – you need to repay each month.
- Interest rate: the amount a lender charges as a fee for borrowing money from them.
Once you make a personal loan application, the lender will check your credit score, your credit history, and see if you can afford the loan that you are applying for. If you are approved, by meeting the lender’s criteria, you will receive your loan amount in either minutes or days.
What is a personal loan used for?
Almost anything! There are many reasons why you might need a personal loan, such as:
- Unexpected expenses like car repairs.
- Medical, utility or municipal bills.
- Large purchases like furniture or a home appliance.
- Upskilling yourself.
- Vacation costs.
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