Low interest personal loans
Jargon jargon jargon. If this is the first time you’re looking into getting a personal loan and you're reading all about it with fresh eyes, then you’re forgiven for getting easily confused. But there's really only a few things to think about when securing a low interest personal loan. Will it be secured or unsecured? Fixed or variable?
If you don’t care for frills, bells and whistles, then why not skip right to the point and enquire about a low interest personal loan? You’ll be saving money on features you won’t be taking advantage of which means saving on time and getting on with making the purchase you need or want.
There are some great low interest loan products out there if you have collateral to secure your loan. But if you don’t then you could opt for taking out a credit card instead (depending on the loan amount). A little harsh? May be so, but without security you’re likely to pay 4% higher for you loan or more! Let’s look into this further.
Start comparing below.
Secured or Unsecured Loan?
With so many low interest loan products out there, it’s tempting to cut through the noise and apply for the first one you read about. But if you’ve ever shopped around for anything before, you know that with a little research you will eventually get the best buy around. It works the same with personal loans of any kind.
Secured: This is the loan option that will always buy you more. The more security the more power to you. Literally. It means that if you have collateral to put up as security toward your loan, lenders will not only look at your application favourably, but reward you with a lower interest rate. Sounds too good to be true, right? Nothing hidden there, it’s simply the best answer to any loan application.
Think of collateral as a ‘promise’ to the lender that you have every intention on paying back what you borrowed. The response is simple: if you don’t pay it back, on time every time, the bank may threaten to take away all or a portion of your security. Sounds fair. (ish)
Compare secured loan options on Mozo by clicking the link.
Unsecured: This is the loan option you kinda settle for. The one where you would like a whole lot of money at once to do the things you love, see the countries you’ve been meaning to or drive the car of your dreams - but at a price. Through the nose as they say. Because you don’t have security as a placeholder on your loan, you’re going to be paying more for it. So the more you borrow, the more interest you pay and the more your repayments will be. But if you don’t have any alternative, then it’s the best option you have. See here to compare unsecured loans.
Low interest loans VS the rest of them
Are you wondering: What will I be missing out on? Applying for a low interest personal loan means that your monthly repayments will be less, but it also means that you may not have certain features included such as:
- the freedom to pay off your loan faster
- your choice of repayment frequency
- a redraw facility
If you don’t care so much about these features, great! Let’s concentrate on securing the best low interest personal loan instead.
Fixed VS Variable Low interest loans
What? There’s more? Yep. But no biggie. Remember, we’ve already covered secured VS unsecured. Once you’ve made a decision about which low interest loan you’ll start with, then you need to make a decision between fixed vs variable. Here’s why:
Fixed: This is the loan option that is predictable. It’s the loan that will let you plan your life around your loan repayments and even let you get on with planning ahead. Like lists? Sticking to a budget? Knowing exactly where your finances stand on a week to week, month to month, year to year basis? Then a fixed loan option is for you. Bear in mind, you may be paying slightly more in repayments in the long run compared to its variable cousin option. But that all depends.
Variable: If you don’t mind chance playing a part in the repayments you make, the variable could be a winner for you. With variable, there’s no telling whether your rate will go up or down. And if the RBA Cash Rate does go down, there’s no predicting that your finance provider will pass on the benefits. Sometimes they do. But more times they don’t. Is this the risk you want to take? In saying that, a variable rate has the reputation in saving money in repayments in the long run, but this is the risk of the money game. Ready to play?
Comparison rate: When you are comparing personal loans you should not just look at the headline interest rate but also the comparison rate. All personal loan lenders are required to display a comparison rate. This is the headline interest rate plus any fees for the loan. It is usually based on a $30,000 loan over 5 years so if you are borrowing more or less than this your comparison rate will be different. Mozo displays this rate clearly in all our personal loan tables.
Who should I borrow money from?
Whether new to borrowing or an old player, ignoring your options is not always out of choice but more habit. Because there is so much more marketing budget for the bigger banks, we see and hear of them more and the alternate lenders kind of get pushed to the side. Since we’re so familiar with the Big Four and tend to go for their products first, we may in fact be missing out on a whole lot of goodness. Here’s how:
Peer to peer VS traditional banks
Peer-to-peer certainly sounds like a strange concept at first. But on closer observation you’ll quickly realise that it has nothing to do with lending money from your mates. Peer-to-Peer, sometimes called online lending platforms or P2P is a form of alternative lending. It means that you can borrow money from another financial source other than a regular bank.
Out of all the alternative lenders, P2P is fast becoming the safer alternative leaving you with more options than the traditional Big Four offerings. Always wanting to keep their toes dipped in, P2P lenders want to prove that they are value for money and have something unique to offer you. They will offer competitive rates, terms and conditions, usually with flexibility, tea and a biscuit. Not the last bit.
Traditional banks were established what seems to be centuries ago, have the surety of the public as they have been trusted members of the community for a very long time. Members often dating back to your forefathers generation, there is little the Big Four have to do to win your trust and so become complacent and sometimes too comfortable in the skin that once formed them.
Having bank alternatives like P2P’s around is great to shake things up, and make the lending game new again instead of wearing the age-old signs, strategies and methods that the Big4 hide under. Competitiveness in the financial market is what will keep the current and the next generation of savers and investors interested to stay in the money game and be more adventurous with taking calculated risks of their own. See here to compare major bank personal loans.
Lower repayments - and then what?
Sure the main benefits to signing up for a low interest personal loan is hundreds if not thousands of dollars you’ll save in repayments, but are there other features you can benefit from?
Since a low interest personal loan is designed to be a no frills option, the features won’t be the same as other standard personal loans. However, shop around, and you’ll see that there are lenders out there who are willing to make their mark and make a difference to the products they offer.
Free extra repayments? Low or no ongoing maintenance fees? Now that’s what we’re talking about. Service is everything, right?
Find out who’s offering best deal with the best features at the moment here on Mozo.
Repayments and Comparison Calculators
Wondering how much you’ll be able to afford to borrow and what kind of repayments you’ll need to make? Check out the Mozo loan repayments calculator which can do all the maths for you.
If you’d like to compare rates and fees of two loans to see which one will be better for your needs, go to Mozo’s loan comparison calculator.
Will a loan with a higher upfront fee but lower interest rate cost you less than a loan with a low fee but higher interest rate?
Tips and traps of low interest personal loans
Surely a low interest loan is just that? Ah, not always. You’ll be surprised how many low interest loan products have so much more weighting than what you’d assume to be a basic low interest loan.
As you do your research, you’ll find that the privilege of securing a low interest personal loan means there may be a whole heap of fees and charges before you even receive your loan amount. Mozo’s advice is, shop around! Crossing the t’s and dotting the i’s is never a waste of time. After all, a loan, no matter how small or large is a serious matter in your life.
What should I look out for again?
As we’ve mentioned, tips and traps on securing a low interest personal loan may mean higher fees to begin with, but there are other factors you need to consider and question before you put pen to paper and hand to pocket:
- I want to pay off my loan faster - can I make extra repayments?
- The rate advertised doesn’t seem to match the rate offered.
- Did you know the penalties can be pretty tough when you miss a payment or make a late payment? You don’t want to add to what you already owe, right?
- If I use my home as security, can I lose my house if I don’t meet repayments?
- Is using online lenders or P2Ps really all that safe? Still sounds odd to me.
- Reviews are useful. Reading up on other people's personal experience can give you first hand insight into what works on a real and practical level, not just on paper. Your first stop should be to read personal loan reviews on Mozo.
If anything from this checklist remains unanswered or you're still confused about certain aspects of your loan, don’t sign anything! Make sure you make an informed decision not a rash one before securing a loan. After all, making a brash decision means you could be signing up for something more than just a low interest personal loan. Any risk is not worth taking unless you know exactly what you’re in for.
Sarah wants to borrow $15000 to go toward her engagement party. She wants to compare a range of products quickly and in one easy place. She visits Mozo’s Personal loans section to review a whole lot of low interest personal loan products before applying, quickly and easily online.
A brief overview of what Sarah discovered:
Secured vs unsecured loan: Since Sarah wants to borrow money with an unsecured loan, she realises that she’s will be contributing a lot more in her repayments compared to a secured loan. As she wants the best engagement party she can afford, Sarah is willing to make the sacrifice and pay a little more toward this fun event.
P2P vs conventional lender: Out of all the providers, the people powered lender came out on top in terms of rates, terms and conditions. P2P lender called: Society One offered the best scenario, suiting her budget perfectly as well. On a 3 year unsecured term, Sarah is expected to repay $476 per month with no more to pay. At 8.95% it’s comparative to a lot of credit cards out there, also giving her the freedom to make additional repayments at no extra charge. Power to the people!
Apply online with ease: Since Sarah is super busy working full time and squeezing in time to organise her engagement, eliminating the need to queue up at a bank and get just one single quote as opposed to many at the same time seems like a waste of time. Having the freedom to apply online means that Sarah can get on with doing the things she needs to stay on top of her short term goals.
Fees: It certainly surprised Sarah as it will most others on the search, that many financial providers are offering low entry or no establishment fees. On top of that, many products on offer don’t charge maintenance fees for the length of the loan. It’s all about shopping around to find the best deal for you and your budget. No point in signing up for the first deal that catches your eye!
Low rate personal loan checklist
In a hurry? If you’re bookmarking this page for later, this checklist is great for a glance-over. Here you can quickly check what a low interest personal loan may entail, fast!
- Can I afford repayments? Remember to take into consideration everyday things like food, petrol, rent, car repayments and emergency costs like dental fees before taking out a loan. Use Mozo’s awesome straightforward and fast results repayment calculator to find out if you can budget in a loan.
- Is my credit rating good? If you’re mostly on time with paying your utility and credit card bills, then chances are your credit rating is ok. If you’re not sure what your credit rating is, visit this site and see for yourself.
- Do I have everything I need to apply for a low interest loan? Do you have proof of your income? Yes? Great start! And we don’t mean the last few payslips. A financial provider will prefer last year’s tax return to really net your worth. If this isn’t possible, then you may want to wait till you lodge your next tax return or approach a broker on how they can tailor a loan to your needs and income.
- How long does it take to apply for a loan? Some banks will not only give you approval in the morning but deliver the funds you need by the afternoon. Some will take longer. It really depends, so do the research and find out who will provide you with the best possible outcome. Bottom line is: don’t leave it to the last minute to apply for the loan you need. The last thing you want is to panic about your loan application.
- Read. The. Small. Print. Yes! Because even a low interest personal loan can mean big risks if you don't know what you're signing up for. Not every consultant has the time to sit through your application to inform you of the traps, so you need to take some initiative and responsibility by doing a lot of the research yourself.