Personal loans

Personal loans are loans for a set amount of money, usually between €2,500 and €25,000, taken out over a set number of years, typically between three and five years (although you can get longer term loans).

The main providers of personal loans are banks, building societies, finance companies and credit unions.

You can use a personal loan for both short and long-term borrowing, such as paying for holidays, education fees, cars, home improvements or weddings. The minimum loan is usually about €2,500, although credit unions will generally give you a smaller loan if you need it.

How personal loans work

You apply for a loan of a certain amount and over a certain term. Note that under the Central Bank's Consumer Protection Code a lender cannot offer you a pre-approved loan. Once your lender approves your loan, they will work out your monthly repayment, and you must pay at least that amount to clear your loan in the agreed time.

With most loans your monthly repayment covers interest for that month and also pays something off the amount borrowed. So, your loan balance goes down each month.

When you take out a loan, you may be offered payment protection insurance (PPI) but the cost of this insurance must be quoted separately to your loan repayment.

Banks, building societies and finance houses usually require you to pay back your loan by direct debit or by standing order, so you will need to have a current account. Credit unions are more flexible and allow you to pay by cash, cheque, bank giro, standing order and in some cases, direct debit.

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