Personal Loans

There are many reasons to apply for a personal loan; perhaps you wish to renovate your home, get married, take holiday, or use it as a car loan. For some people a personal loan can also be the key to getting them out of debts that they have already accrued. If this is you, we will be adding a page specifically about debt consolidation loans at a later date, but in the meantime there is plenty of relevant information at our sister website www.onlinedebtconsolidation.com.au

Personal Loans Overview

There are dozens of loan lenders offering personal loans and they all have their own terms and conditions which you should study carefully before you agree to anything. The amount you can borrow depends on the loan company, but many offer sums from $3,000 up to $50, 000, though with some, the size of the personal loan is unlimited. It is common for the loan period to run from 1 to 7 years, though again, this is at the discretion of the lender.

You should be especially aware of the interest rates that come with your personal loan. Whilst the interest rate is usually better than that for a credit card (one of the reasons why they are great for debt consolidation), it tends to be considerably higher than you would pay on a home loan. Also, most personal loans include a set amount which has to be repaid. It is common for the interest rate to be fixed, though it you may be able to negotiate a variable rate, but this will depend on the loan lender.

Types of Personal Loans

There are four main types of personal loan and some loan lenders offer them all, whilst others specialize. Before you rush off and apply for your personal loan, it's a good idea to look at the differences between these loans and decide which one is most suitable for your financial needs, as choosing the right kind loan can often save you money.

Fixed Rate Loans – As the name implies, when you sign for this type of personal loan, the interest rate is fixed and will remain so for the course of the loan. The good thing about this type if personal loan, is that you know from day one exactly how much each repayment will be. The bad thing is that even if interest rates in general come down, you will still have to pay the same, possibly higher than average, rate.

Variable Rate Loans – With this kind of personal loan, the interest rate can fluctuate with market forces. This can work in your favour if interest rates go down over time, but can also be bad for your financial health if they suddenly go up.

Secured Loans – To get a secured loan, you have to have something that you can offer the loan lender as a guarantee on the money that they lend you. Often, with secured personal loans, the thing that you put forward as collateral is the very item that you plan to use the loan money to buy. Hence, if you are borrowing money for a new car, the car becomes the asset that secures the loan and should you default on your personal loans repayments, the loan lender will take that car.

If you are looking to borrow money for something like a holiday, rather than an actual thing, you will still have to put something tangible up to secure your personal loan. In cases like this, you may have to offer your existing car, or even home, to get your personal loan.

Unsecured Loans – If you have nothing to offer your loan lender as collateral, then you have no choice but to apply for an unsecured personal loan. Unsecured loans are a more specialized type of personal loan and not all regular finance companies will offer them, so check before you waste time applying. Since you can't give the lender anything of value to guarantee your unsecured loan, this kind of loan is usually only for smaller amounts of money and often comes at higher interest rates, due to the greater risk involved in lending to you.

Beware of Fees and Repayments

Whichever type of personal loan you apply for, make sure that you read all the small print and are fully aware of all the fees and charges that come with the loan. You could find that your personal loan entails establishment fees, ongoing fees, redraw fees and exit fees, as well as the repayments that you'll be obliged to make each month.

It is also a good idea to check exactly how much you monthly repayments will be. You can do this by using a personal loan calculator, many of which are available online on loan lender websites.