A personal loan provides a way to access cash quickly, which can come in very handy at times. All of the major banks and many small credit service companies provide personal loans, so you have the power to pick and choose the loan that suits you best. Depending on the demand for loans, banks will offer more or less favourable terms for personal loans. You will definitely want to shop around to find the best offer.

First, ask yourself what you need that money for. Do you need that cash to pay for studies, or to make up the difference in what you're missing for a down payment on a flat? If you can get a student loan, a car loan or a renovation loan, those will usually turn out being a lot cheaper than general personal loans.

In my opinion, the only good reason to take a personal loan is to pay off credit card debt (although a better solution to that is to get another credit card with a 0% balance transfer offer) as interest rates are lower for personal loans than for credit card balances. Of course there may be other circumstances where a personal loan provides the best credit option.

If you plan to apply for a major loan, such as a home loan or a renovation loan, then it's best to avoid getting personal loans until after you've been approved for the big one. That's because getting a personal loan increases your Debt Servicing Ratio. That ratio indicates how much of your income goes to repaying debt, and banks don't like to lend to people who have too much debt for their income.

Consider offering collateral. Personal loans don't require you to put up any securities, which means that if you blow the money on hats, the bank has nothing to take in exchange (a flat, car, etc.). Since people do default on their loans from time to time, offering personal loans is only profitable because of the high interest rates charged.

If you have possessions which you can offer as securities, I recommend you look for a bank that offers secured personal loans, as the interest rates will be much lower since there's less risk for the lender.

When shopping around for personal loans, there is one major (but often overlooked) factor you should consider before making your choice. That is the penalty rate. If you fail to make a payment, your interest rate will be bumped up to a higher penalty rate, but some lenders charge much lower penalty rates than others.

Nobody plans on missing a payment, but it does happen and money is one of those funny things that we can't completely control. Always check the penalty rates and choose the personal loan that offers the lowest, as long as the standard interest rate is still good.

Your income will be the deciding factor in getting approved for a loan. Most banks provide personal loans equivalent to 5 times your monthly income. You will normally pay an annual fee on top of repayments and interest. This fee varies between banks and loans.