Essentially, a personal loan is money borrowed from a bank or other credit provider that you pay back as a fixed monthly loan repayment. A personal loan is an unsecured loan, which means it is not backed by collateral (which is what your home is when you take out a mortgage bond - the bank always has your home as security and can sell it to recover the debt, if necessary).
Here are five tips that will make you smarter about loans:
1. Understand the true cost of the loan. When you are shopping around for the right loan, make sure that you compare apples with apples. The true cost of a loan takes into account the interest payable, any other charges and when the payments are due. Some banks say they offer preferential rates to their current account customers, but you might find there are more affordable loans available elsewhere. So, shop around and get all the facts before comparing loans.
Find out what happens if you miss a payment. What are the penalties?