Much like any types of loans, personal loans Australia function in the very same way. Basically, personal loans help in financing your short term or long term monetary needs. You acquire some money from a lender or a traditional bank. Both you and the lender will need to sign a contract to repay your loan in equal increments within a specific agreed period.
Your monthly payments will comprise of the interest, fees, and principal loan. Should you make your monthly payments diligently as established within the loan agreement, the loan will be repaid at the time the term of the loan ends.
Personal Loans Australia – Understanding the Process
Look for the right personal loan that will match your needs. Depending on your needs you will want to consider the right loan among the many personal loan types. For example, if you are looking to purchase a new or used car, car loans can work for you. Other types of loans to consider are secured personal loans, unsecured personal loans, short term loans, personal overdraft loans, and personal line of credit type of loans.
5 Things to Consider in Choosing the Right Personal Loan
Loan amount. The highest or the least loan amount a lender can approve depending on your circumstance. Does it suffice the need?
Loan terms. The length of time that you are going to repay the loan. Terms differ from lender to lender. Generally, it follows a one year to as long as seven years.
Fees. Is there an upfront fee, application fee, and ongoing fee? Are fees incorporated in the loan amount offered?
Interest rate. What is the interest rate? Is it fixed or variable? Is the rate affordable?
Repayments. How much is your monthly repayment? Is it affordable? Use a loan repayment calculator to determine this. Can you choose between monthly and weekly repayments? Is making extra repayments accepted without a fee? Is early repayment possible? Is there a penalty with early loan repayment?
Find out if you are eligible to get a loan. Most lenders follow general set rules to determine if you (borrower) are eligible to take out a loan. General eligibility requirements are as follows:
- At least 18 years old qualify for a loan in Australia.
- Must be working (employed or
self employed) or receiving a steady monthly income.
- Posses a permanent residency in Australia (Australian citizen).
If you meet all eligibility requirements, lenders will still look into your financial situation to determine if you can afford to pay monthly payments on the loan.
Personal Loan Application Process
The process for application is different from lender to lender. You can choose to apply online, through their branch offices, or over the phone. During the application process, the lender will require you to furnish them personal and financial documents as follows:
Proof of Identification. A sample of this includes a driver’s license, passport, or any government-issued photo IDs.
Proof of Income. This could be a copy of your payslips, bank statements, and recent income tax returns. If you are receiving Centrelink benefits, you can provide receipts issued to you.
Other documents. Depending on the lender, they may ask you to provide other financial documents to gauge your financial standing.
The Approval Process
There are lenders who can give you an immediate answer after you have submitted application form and requirements. However, there are also other lenders who may need time to assess your application. This can take days or weeks. You may receive full or conditional approval.
Conditional approval is a possible approval however requires more documents from you. This could be additional financial documents such as payslips or documents that relate to your assets and debts.
Full approval means you have provided adequate information and as a result, the lender was able to make an informed decision to provide you with a loan.
You can receive your loan in various ways but it usually depends on the loan you applied for. For instance, if you took out a car loan, the lender can directly pay the seller on your behalf. If it is for an unsecured loan, you will be receiving your funds through the bank account you have elected to use.
Lenders allow you to select your repayment structure. You can elect to pay on a weekly, fortnightly or on a monthly basis. Typically, the more frequent you pay back your personal loan the lesser interest you are going to pay. Also, you will have to consider additional payments and repayments when selecting a repayment structure.
Know if the lender charges you extra fees for extra monthly payments. You may also what to check if there are limitations on extra payments you are going to make each year. Finally, it helps to know if there are penalties involved for early repayments.
Closing the Loan
Should you be making regular repayments as defined in the loan agreement, then expect the loan to be closed after the final repayment. But if you are going to make an early loan repayment, call your lender as to know the exact figure you are going to pay to make sure the loan will be finally closed.