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A personal loan is generally taken out to generally fund either a large expense - such as home renovations, weddings, cars, and holidays - or consolidating debt.

Repayments are made over a set period - usually two to seven years - with interest payable on top. A personal loan can be a big commitment, so it’s worth doing your homework to get the best deal and make sure you can afford the repayments, especially if you’re considering a personal loan to consolidate your debt such as credit card repayments. It’s worth getting financial advice before you commit to a personal loan.

The different lenders we work with at Compare Club offer varying minimum and maximum loan amounts, ranging from $2,000 to $50,000.

Like any loan, your borrowing power will depend on your financial history and your ability to make the repayments. The lender will take into account your income and credit history, along with your monthly commitments like mortgage or rent, car running costs, insurance and credit card payments.

Before you take out a loan, it’s a good idea to crunch the numbers to see how much you can afford as you don’t want to lock yourself into repayments that stretch your budget. As well as the monthly repayments, check the fees and any other costs attached to the loan. This will be shown as the comparison rate and is the true cost of the loan.

The lender you choose should be based on your personal circumstances and the product features you’re looking for. Banks are popular for personal loans, but you can also get a personal loan through other finance companies and non-bank lenders, and we have a number of these on our panel.

When it comes to personal loans, interest rates are a big factor, so shop around for a low rate and look out for additional costs like application fees, monthly fees and early exit fees.

You can compare lenders and apply for a personal loan through Compare Club Personal Loans, as well as through banks or other finance companies.

There are two main advantages of comparing loans through Compare Club. Firstly, it allows you to compare loans side by side, saving you time - and hopefully money - by being able to view all the information in the same place.

Personal loans will have different interest rates and features, so think about what you want from your loan and ask yourself the following questions. Can you make extra payments or pay out the loan early? Can you lock in a great fixed rate? Are there monthly fees?

The second advantage is that comparing personal loans through Compare Club will not affect your credit score. The initial quotes we show you will result in a soft credit check (sometimes known as a soft inquiry).

The soft check will appear on your credit history but won’t affect your credit score. We run soft checks to help filter out any lenders on our panel who may decline your application.

Applying for a personal loan through Compare Club will result in a hard inquiry. This is where a lender checks your credit report when you apply for a new loan. Hard inquiries will affect your credit score.

The lender will need to verify your income and do a formal credit check. And, like any loan, you’ll need to provide personal information and paperwork.

You will generally be asked to provide:

• Proof of income – usually three current payslips

• Bank account statements

• Photo ID such as a driver’s licence and/or passport

• Other ID such as a Medicare card

• Details of expenses, like rent or mortgage, car expenses and credit card payments

This depends on what you take out the loan for. Generally the answer is no. If it’s for a wedding, holiday or renovations to the home you live in, or for a similar purpose, a personal loan would not be taxable.

But, if you take out a personal loan that impacts your current or future income, you could potentially get a tax exemption on the interest.

For example, if you use it for renovations to an investment property, you may also be eligible for a tax exemption.

These are just a few examples. As everybody is different, it’s best to check with an accountant or financial advisor to clarify any tax implications before signing on the dotted line.

Yes, but there’s a strong possibility it will affect your future home loan application. That said, the impact could be both positive and negative.

Let’s say you’re close to paying off a personal loan with no late payments. This will prove you can manage your money and put your ability to pay off a home loan in a favourable light.

But if you’re in the early stages of a loan, the repayments will count as an expense, which is likely to reduce your borrowing power. The lender may even add a buffer to allow for rising interest rates if your loan has variable interest.

Most personal loans are unsecured, which means there’s additional risk to the lender if you can’t meet the repayments. And if you’ve missed any payments when you apply, the lender will see it as a red flag.

For people with a bad credit rating, nominating a guarantor could improve your chances of securing a home loan. Nominating a guarantor has risk associated for the guarantor, so we encourage you and the guarantor to review all risks associated before taking out such a loan.

And if you’re interested in finding or refinancing a home loan, our team of specialists would be happy to help. Fill out our home loans enquiry form or call us on 1300 190 429.