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Discover 4 Personal Loan Tips

Discover 4 Personal Loan Tips

Personal loans are all about giving you options and flexibility.  Thinking about renovating your home or planning overseas travel (now that border restrictions are slowly starting to ease)?  A personal loan can also help pay for unexpected medical expenses, assets, education costs and consolidate debts (more on debt consolidation later).  The personal loan market is highly competitive.  You may be surprised to learn that the big 4 banks don’t always have a personal loan product best suited to your needs.  Read on for more on our top personal loan tips.

Personal Loan Interest Rates

Depending on the lender, a personal loan typically ranges from $5,000 – $50,000 and is paid back between 1 – 7 years.  Like mortgages, personal loan interest rates attract either a fixed or variable rate.  Interest rates can vary between lenders, depending on whether the loan is secured or unsecured.  If the loan is secured, it means that you offer an asset as security for the loan.  For example, if you offer your boat as an asset, it means that if you default on the loan, the lender has the legal right to repossess the boat as payment for the loan.  An unsecured personal loan typically attract higher interest rates.  You need to prove to the lender that you can pay back the loan within the specified time frame, so having a good credit score will help you secure a lower interest rate. 

Why Pay Tom, Dick And Harry?

Suppose you’re tired of chasing your financial tail from paying multiple creditors at different times of the month (all at differing fees and interest rates).   In that case, a personal loan to consolidate debt, could be a good option for you.  A personal loan can help pay off your different creditors, often at a lower interest rate than your current repayments.  You can then make one monthly repayment to one lender by consolidating your debt.  This can help reduce your monthly expenditure and improve your cash flow depending on your financial situation.  If your long game is to buy a property or refinance your mortgage, then debt consolidation can be a big drawcard.  Home loan lenders would rather see you paying off one creditor than multiple ongoing creditors, which can look like robbing Peter to pay Paul.

Find Out The Fine Print

As mentioned, the terms of a personal loan will vary considerably between lenders.  The interest rate shouldn’t be the only thing you consider when looking for a personal loan.  Will you be penalised if you want to make additional repayments?  Some lenders will, depending on their terms and conditions.  Also, be sure to compare features, service, application and early repayment fees, as these will all affect how much you end up repaying over the entire loan term.  Other things to consider are the loan length and how frequently you can make repayments.  Shorter repayment terms can sometimes mean lower fees. 

Are Buy Now Pay Later Store Cards And Fast Cash Loans Like Personal Loans?

In short, no.  Although they are not considered credit facilities, lenders will treat them like credit cards for servicing purposes.  Plus, you are still subject to credit checks as you are with personal loans.  Fast cash loans and buy now pay later facilities attract high interest rates, of 48%  and upwards in Australia, not to mention the additional fees associated with these loans. When you calculate how much more money you have to pay back on a fast cash loan, it’s enough to make your eyes water….

Personal Loan Advice

The great thing about using a finance broker instead of finding a product on your own, is that brokers have knowledge about products that aren’t readily advertised, especially by smaller or reputable online lenders who use brokers to market their loans.  Smaller lenders can often provide better terms, features and interest rates than the bigger banks.  If you’d like to speak to a broker about a personal loan, give us a call on 0479 081 117; we love to help.