Personal Loan and Consolidation Loan — Who Are They For?
Both types of loan may look similar at first glance — the bank lends you money and you repay it in instalments. The difference lies in the purpose and how they work.
Personal Loan
A personal loan is a loan for any purpose — holiday, home renovation, appliances. You decide how to spend the money. The bank assesses your creditworthiness based on income and credit history.
Consolidation Loan
A consolidation loan combines several existing debts (credits, loans, credit cards) into one instalment. The aim is to lower the monthly payment and simplify repayment. Often comes with a longer repayment period.
Which is cheaper?
- For a single purchase — a personal loan with a competitive APR is usually optimal
- For multiple debts — consolidation can reduce the monthly payment by 20–40%
- Always compare the total cost of credit (APR × term), not just the monthly instalment
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Tags:
Comparison
Cash loan
Debt consolidation
APRC
MK
Marcin Kowalski
Financial Specialist