Personal Loans are one of the most common lending options everyday Australians take advantage of for a myriad of reasons. They are a popular finance choice, and for good reason.
If you’ve never had a Personal Loan before, but are thinking of applying for one, this guide will give you an overview of what Personal Loans are about, what the funds from a Personal Loan can be used for and how a Personal Loan can be your saviour.
It’s always a good idea to understand what you’re getting into before you apply for a Personal Loan.
Why Are Personal Loans So Popular?
For starters, the majority of Australian lenders – whether they be banks, credit unions, building societies or private lenders – offer some form of Personal Loan. No matter which lender you choose to approach, chances are, Personal Loans will be an integral part of their product offers.
What borrowers love most about Personal Loans is they are not tied to one specific purpose, unlike something like a Home Loan, for example. Just as a credit card is versatile when it comes to spending, so are most Personal Loans. While each lender can certainly vary regarding valid spending or purchases for Personal Loans, they can generally be used for a number of different reasons and this makes them attractive.
Personal Loans are flexible, practical, versatile and are offered by the majority of Australian lenders. A personal loan is better than your average credit card, as interest rates are generally much lower and you have a fixed repayment period.
Security Or Collateral Is Optional
You have options with Personal Loans. Some lenders give you the choice of a secured or unsecured Personal Loan, while other lenders simply offer the more popular unsecured Personal Loans.
When you apply for a secured loan, you’ll be putting something of value up as collateral against the loan, such as your home or your car. In the event you don’t repay the loan, you could risk losing your collateral. The incentive of secured Personal Loans is interest rates tend to be lower than unsecured loans and there is more chance of getting the loan application approved.
Unsecured loans give you more freedom, in that you don’t have any of your possessions on the line by being tied up in the loan contract. These types of loans are therefore less risky to you as the borrower, but are generally more flexible too, with lenders offering repayment terms from 3 months up to 7 years.
If your preferred lender offers both secured and unsecured Personal Loans, it will be up to you to work out which option is best for your personal circumstances.
Repaying a Personal Loan Helps Your Credit Score
Your credit record and credit score are important. The better the score you have, the better the chance of being approved for finance in the future. If you’ve had credit in the past, but your score isn’t healthy, paying back a Personal Loan can help repair your credit score.
If you have no credit score yet, then you can create a good score by getting a Personal Loan and making sure you make all the repayments on time. Better still, pay back more than the minimum weekly or monthly payment. This will give your credit score a nice boost.
What’s Required To Apply For a Personal Loan?
Some of the lending criteria will vary a little depending on the lender, so be sure to check, but generally, you’ll need to be able to prove your identity with a government-issued photo ID, such as a passport or driver’s license. Nobody will lend you money if you cannot prove that you are the person on the application.
In order to apply for a Personal Loan, you’ll also be required to show proof that you have an income and the means to repay the loan. This proof will come in the form of some recent payslips from your employer if you’re a wage earner, or financial details from your accountant if you run a business.
Australian lenders will generally only extend finance to people who are either Australian citizens or Australian permanent residents.
When you go to apply for a Personal Loan, you’ll be asked a question about what you want the money for, what you’ll be spending the funds from the loan on. Before applying, check with the lender to ensure your spending goals are in line with their lending criteria. While Personal Loans are flexible, lenders won’t give you a loan if you plan to use it for something that could potentially put you in further financial difficulty, such as gambling.
Once the application has been filled up, you’ll need to attach any supporting documentation the lender requires, such as proof of income and your ID.
In most instances, you can complete the entire application process online.
Take Note Of Interest Rates, Fees and Loan Terms
Australia has so many lenders offering Personal Loans, that you’ll want to take the time to compare fees, interest rates and loan terms. This way, you can determine what’s the best deal for you. Interest rates on Personal Loans can vary quite a lot, so be sure to take note.
Also, apart from a mandatory loan-application fee, some lenders will have some “hidden fees” buried deep in the fine print on their website or loan contract. Check for extra fees apart from the loan application fee and include these in your final decision-making process.
Loan terms are another fact you’ll need to assess. How long do you want to take out the loan, and does this time frame fit in with what a particular lender is offering? For example, many banks have Personal Loan terms ranging from one year and up to 7 years on average. With private lenders, you can often get terms as short as three months if you want to repay the loan quickly. It really depends on how much you want to borrow and what time period works best for you.
If in any doubt, always talk to the lender before filling in any application forms.
Situations In Which a Personal Loan Can Be Your Saviour
Sometimes, borrowing money can be the solution to a pressing problem, such as when you’re faced with an emergency. Perhaps you or a loved one has had an accident and needs urgent medical care. If you don’t have the money to cover the costs, you’ll have to find it somewhere, and quickly. A Personal Loan can really save a lot of unnecessary stress in situations like this.
Likewise, an unexpected cost or some other expense may come in and you find you don’t have the money to pay it on time. Again, finance in the form of a Personal Loan can be a lifesaver. For example, a broken fridge can easily and quickly be replaced with the help of a Personal Loan, and then you can repay the money you borrowed over time with no stress.
Another scenario might be where your car breaks down and you don’t have enough money for the repairs to get it back on the road. Once again, a Personal Loan can come to the rescue.
Reasons To Apply For a Personal Loan
Apart from helping to resolve emergencies from a financial standpoint, Personal Loans can be used for numerous different purposes.
Paying for a dream wedding is one very popular way people put the funds from a Personal Loan to good use. Going on that holiday you’ve always fantasised about is another very common choice. Consolidating all of your debts into one simple loan is very popular when it comes to Personal Loan spending options.
What you can spend your Personal Loan funds on will vary a little from lender to lender, so be sure to check this. Having said that, most lenders allow you to borrow money for numerous purposes. Other common reasons to apply for a Personal Loan include:
- Undertake home improvements
- Purchase new furniture
- Buy a car
- Educational expenses
- And more…
You Can Apply Online
This is one of the real positives of Personal Loans and why they are popular. Most lenders allow you to complete the entire loan application online, which you can do from the comfort of your own home at any time of the day or evening. It’s about convenience and having access to the tools you need 24/7.
Remember, your lender is just a phone call or quick email away should you encounter any issues or have questions about the application process.
Where To Apply For a Personal Loan
As mentioned at the beginning of this guide, the majority of Australian lenders offer some form of Personal Loan, so there are a lot of choices. So many, in fact, that it can get confusing. That’s why it’s important to assess your personal needs and take the time to find the right lender for you. A Personal Loan is a contract that you enter into, so make the right choice before committing to a deal.
To learn more about how we can help you and what we offer when it comes to Personal Loans, just give us a call and have a friendly chat with our staff.
Disclaimer: Please note this content is of general nature only and does not take into account your personal objectives, financial situations or needs. For advice tailored to your financial situation, it is advised that you seek guidance from an accountant or financial advisor. The information contained in this article is correct at the date of publication.