Whether it’s to go on an exotic getaway or kit out your flat with some brand new furniture, a personal loan can be a great option. So to help you pick out the perfect loan, we’ve compiled a list of the most commonly asked questions that come with finding the best $5,000 personal loan for your spending goals.
What type of $5,000 personal loans are available?
When you start searching for personal loans, you’ll find there are two main types, secured and unsecured. It’s important that you don’t just pick the first one you see, as there are big differences between the two and you’ll need to choose the one that best suits your needs.
For example, secured personal loans may come with a lower interest rate, but it will also require you to use an asset as security against the loan. So if you ever default on your loan, the lender has the right to repossess the asset. On the other hand, an unsecured personal loan won’t require any security, but there’s usually a higher interest rate.
How much interest will I pay on a $5,000 personal loan?
The amount of interest you’ll pay will depend on a number of factors, like the loan term and the interest rate.
What should I compare in a $5,000 personal loan?
So you know you need a $5,000 personal loan, but do you know what features and fees you should be looking for? So before you start your search for the perfect loan, here are some of the things to keep an eye out for:
The interest rate
This is possibly the first thing you’ll consider when looking for a personal loan and can have a big influence on which loan you apply for.
To give you an idea of how much interest you could be paying over different loan terms, we took our personal loan repayments calculator for a spin. Say for instance you took out a $5,000 personal loan at a rate of 7.99%, over 5 years you’d pay $1,081, while the same loan over three years would only see you pay $640 - a difference of $441.
The comparison rate
You might notice that rates for personal loans often come in twos, the regular interest rate and the comparison rate. The comparison rate factors in not only the interest rate, but fees and other costs you’ll have to pay over your loan. While this can give you an idea of what your loan might actually cost, you should still take it with a grain of salt, as it is still an advertised rate. Your comparison rate will depend on your loan amount and borrowing capacity.
Regardless of if you’re after a $10,000 or $5,000 loan, you’ll likely have to pay a few fees. Two of the most common fees you’ll find with a personal loan are upfront and ongoing fees.
An upfront or application fee is charged at the start of your loan and is usually a one-off payment. These can reach up to $600, so you’ll need to make sure the benefits of the loan outweigh this cost.
Ongoing fees kind of a maintenance fee and are usually either charged on a monthly or annual basis. Other fees you may notice are late payment or discharge fees.
For some added flexibility in your loan, you may also have access to some handy repayment features. Having an extra repayments option attached to your loan can help you cut down on interest and pay off your loan faster. Just keep in mind that lenders may set a limit to how much you can repay and could charge a fee.
Your loan may also come with a redraw facility, where you can redraw your extra repayments to pay for unexpected bills or expenses.
A final thing to mention is that once you start paying your loan off, you’ll often be able to make your repayments on a schedule that suits you best, either on a weekly, fortnightly or monthly basis.
Why should I avoid applying for a $5,000 personal loan with poor credit?
Although a personal loan can be handy, applying with bad credit isn’t always a good idea. Bad credit loans tend to have super high interest rates, that can go up to 48% and charges hefty fees. Plus, not only does your application have a higher chance of rejection, if you are rejected, it will go onto your credit history.
Want to know how much your repayments might be? Check out our personal loan repayments calculator.
How can I repair my credit history so I can apply for a personal loan?
Having a poor credit history does not mean you’ve hit a dead end, as you are able to repair it. Some of the ways you can work towards improving your bad credit history before applying for a $5,000 loan include:
- Minimise unnecessary spending so you have more money in your in savings for unexpected bills and expenses. That way, you’re less likely to resort to credit when you shouldn’t.
- Set up a direct debit for bills, like insurance or your phone bill so you never miss a payment
- Pay any outstanding bills and fines as soon as you can. The more you delay paying these, the higher your debt will climb and the worse your credit rating will become.
- And while we’re on the subject, avoid using your credit card to pay for these outstanding bills, this has the potential to put you into more debt.
- Close any unused credit accounts. Lenders will look at the amount of credit available to you as potential debt.
- Avoid starting any new credit applications until your history is looking healthier, because if you are rejected, this will worsen your credit score. Even if you decided to withdraw the application, it can still be recorded on your credit file.
Can I get a $5,000 personal loan with no credit check?
Yes, there are some options. If you do apply for a no credit check personal loan, it means that your lender will not request your credit report from any credit bureau to check your borrowing capacity. The lender will check your bank statements and will look at your income and expenses. This is to determine if you can afford to repay the loan.
But just like applying with bad credit, this is highly risky to do because of the high interest rates and fees involved and remember, your application will appear on your credit file, regardless of if you are approved or rejected.
Are there any eligibility requirements with a $5,000 personal loan?
If you are thinking of applying for a $5,000 personal loan, depending on the lender, you may find that there are some eligibility requirements, like:
- Having a stable income - Although you may only be borrowing a small amount, many lenders will only approve your loan if you are employed or have a steady income.
- Clean credit history - Many banks or credit unions may not issue loans to borrowers with a poor credit history. If this is you, you may still be able to apply for a $5,000 personal loan with bad credit. However, you might be better off repairing your credit history first, before applying for a loan.
What do I need to apply for a $5,000 personal loan?
When you find the right loan and are ready to apply, you’ll need to provide your lender with some info and a few documents in your application to determine your reliability as a borrower and borrowing capacity, including:
- Your employment status/income - Many lenders may not approve you for a loan if you are unemployed or don’t have a steady income.
- Your current debt - Lenders will want to see any other liabilities you currently have, which may impact your ability to meet repayments, like existing credit card debt or your mortgage.
- Any savings you might have - It’s important to have at least 3 months worth of savings to prove that you can be responsible with money.
If you are looking for a loan of a different amount, check out $10000 personal loans or even $50000 personal loans.