A personal loan can be used for many reasons from helping with large expenses. It is a smaller loan than a mortgage and is frequently used to consolidate debts into a single repayment or pay for large expenses like holidays, weddings and cars. Unlike a mortgage, our personal loans are “unsecured” which means borrowers don’t need to provide a deposit or collateral (like your home or car). Unsecured loans are also paid off over a shorter period
Choosing a personal loan in Australia
The first thing you’ll have to do when you’re looking at Australian personal loans is to make sense of what precisely you need from your loan. Your loan’s purpose is important because lenders often assess your suitability for a personal loan based on what your loan purpose is. For example, some lenders approved with you borrowing for a renovation, but not for a wedding.
There are different types of personal loans available, and the type of loan that is right for you will generally depend on what you need the loan for.
Secured vs unsecured
Both secured loans and unsecured loans in Australia have related advantages as well as risks, so the type of personal loan most suited to your situation will rely on your purpose for applying for a loan.
A secured loan refers to a loan which is tied to an asset. Most regularly offered for assets such as cars and homes, secured loans are generally granted on the premise that the associated assets act as a guarantee, thereby giving the lender the ability to repossess the asset and sell it to obtain the amount owing if you default on your loan. This decreases the risk factor for the lender, which is the reason you may find that the interest rates related with secured loans can be lower than those associated with the alternative—unsecured loans.
Unsecured loans are loans which do not require security on the borrower’s part. Such loans are generally granted for smaller amounts than secure loans, for personal discretionary purposes such as renovations, travel or medical bills. Some lenders might allow you to nominate family members to act as guarantors for unsecured loans, thereby reducing the risk associated with the loan for the lender. The reason this type of personal loan is called unsecured is that it is not secured by any particular asset. This means that the bank does not hold security over any of your assets.
Pros and cons of personal loans in Australia
Being approved for a personal loan could provide you with the financial assistance needed for that huge purchase, holiday or renovation you had in mind. A personal loan’s interest is also typically lower than that of a credit card, which means you should pay less in interest in the long run. That being stated, taking out a personal loan will add to your debt, which not be ideal for those who already have a huge amount owing on a home loan or credit card or other personal loans.Similarly, with any financial decision, it’s important to do your research prior to committing to a loan.
Choosing the Right Personal Loan
Getting the right personal loan is important, as the wrong loan could end up costing more in unnecessary fees and interest. If you are unsure of the right personal loan for your needs you may seek advice from our Loan Specialists. Just simply fill out our Online Contact Form and one of our Loan Specialists will get back to you.