Personal loans allow you to borrow a lump sum of money that is paid back over a set period with fixed monthly payments. They are often used for larger purchases such as home renovations, vacations, or consolidating debt. With personal loans, you know exactly how much you owe and when your loan will be paid off.
How They Work:
- Fixed Interest Rate: Personal loans typically come with a fixed interest rate, meaning your monthly payment stays the same for the life of the loan.
- Term Length: Most personal loans in Canada have terms ranging from 1 to 5 years, with the possibility of paying them off early without penalties (depending on the lender).
How Personal Loans Affect Your Credit Score:
Taking out a personal loan will impact your credit score based on your payment history. By making regular, on-time payments, you can positively affect your credit score. However, missing payments can lower your score, so it’s essential to budget and manage your repayments carefully.
