Even if you’re a savvy saver, it can be tricky and time consuming to pay for something outright.
But it’s hard to know where to start when it comes to personal loans.
Whether you’re paying for a big purchase like a car, or a life event like a wedding, we can tell you what you need to know about personal loans so you can find the best one for you.
A personal loan is a specific amount of money borrowed to you to pay for something that you can’t buy outright.
Personal loans allow us to enjoy peace of mind by not needing to cover full costs on the spot. You just have to repay the money and the interest over an agreed timeframe (known as a term).
Money can often be tight.
We can’t plan for emergencies or rely on breaking the piggy bank every time unexpected expenses occur. Plus, let’s not forget everyday life expenses on top of that as well.
Personal loans can help us to balance out the needs and wants in our lives.
No, not at all. In fact, it’s quite the opposite.
Loans don’t necessarily mean you don’t have money in the bank or you’re struggling to make ends meet. It’s a system for you to organise your other expenses.
Given you can make your repayments on time, taking out a personal loan can relieve you from the stress of sorting out major expenses while being able to enjoy other things in life.
Whether it’s a small loan to help with the unexpected or a larger one for your dream home, there are different types of personal loans to consider.
We recommend researching different lenders to find out which one has the right loan for you.
Think about someone lending money to you for the first time – how are they sure that they’ll ever see their money again?
Showing a lender that you also have something at stake means that they would be more likely to give you a loan.
Secured personal loans take effect when you give the lender something in exchange that they can use to sell for money back if you fail to repay on time. This could be a car or a high-valued asset.
If you do choose to take a secured loan, your interest rate will be lower than if you choose the unsecured option.
As the name suggests, an unsecured personal loan means the lender is relying on good faith when they lend you the money.
Basically, it means that they’re not guaranteed to get back the cost of the loan as you’re not securing an asset (like a car) against it.
If you can’t pay it back, the lender can seek legal justice and take you to court to get back the money owed by you.
When you take out a loan, keep in mind that it may or a fee – sometimes maybe even both.
Why do you have to pay money to borrow money? Because you’re paying to use money you don’t have yet.
Getting a Fixed interest rate would mean that the interest is not variable and won’t change throughout the life of the loan. This means you’ll know the amount of interest you’ll be paying over the life of the loan.
A Variable interest rate means that the rate you pay may vary from time to time during the life of your loan.
The most common one is simple interest which is the most basic type of rate. Simple interest is paid only one time and does not change. With this method, you just need to multiply your loan balance by your interest rate and divide it by 365. This will show your daily interest charge. As interest is usually charged monthly, the daily interest amount is then multiplied by the number of days in the month and for the term of your loan.
Banks and retail lenders are your best place to start. The most important part is choosing a lender that works for you.
Everyone’s needs are different, so the best loan is one that will meet your expectations and financial situation.
We recommend researching the different loans available to figure out which one is right for you, comparing all the factors against each other.
Good question! Knowing what to look out for will make your life easier when it comes to taking out a small personal loan.
Anyone can apply for one.
However, there are lots of things that determine whether your application will be approved, like your ability to repay the loan without trouble.
Yes, taking out a personal loan can affect your credit score.
The whole process relies on trust. If a regulator can see that you’ve made too many applications, missed repayments, or that you’ve chosen a high-risk lender, you may not be approved for a loan.
The Australian Securities and Investment Commission regulates lenders to make sure that money isn’t lent to those who have a poor history of paying it back.
The world of loans can seem scary and intimidating – we get it. If you do your research and ask the right people for advice, you’ll be ready to take on anything that comes your way.