If only money grew on trees…ah yes, wouldn’t that be lovely! While notes may not sprout from trees, there’s still a means of accessing finance, in the form of a personal loan. When you don’t have the money for some of those big ticket items, a personal loan can help you achieve your financial goals. There are a range of lenders out there who offer different types of personal loans, which one you go with, will all depend on what it is you’re after and your financial situation. Regardless of the type of personal loan, you will incur interest, fees and charges during the loan term so be sure to read the fine print. This handy guide will give you all the ins and outs of personal loans.
It’s only human to have the urge to go trek around South America, renovate your 1950’s bathroom or upgrade your old school Holden. Be it a necessity or a desire there are many sorts of personal loans that can turn your dreams into a reality! Here’s a list of what you can take a personal loan out for:
There are lots of options when it comes to choosing a personal loan. It all comes down to what suits your personal needs and financial situation. To avoid the head spins and confusion, Mozo has broken down the different types of personal loans for you below.
Compare 140 loans from 43 banks right here!
A secured personal loan requires you to put up an asset as security in order to borrow money from the lender. As security for the bank you can offer your car, house or even jewellery as collateral. This means the lender can take possession of your asset if you fail to make the required repayments. The bank enjoys the security against defaulting, and you enjoy the lower interest rates that come with less risk for the bank. Check out some current secured personal loans deals on the market.
An unsecured personal loan does not require you to put up an asset to the lender for security. So if you don’t have an asset like a car or a house you’ll be looking at taking out an unsecured loan. You may have to convince the lender you can make the repayments on the loan by way of providing evidence of your income through pay slips. If it’s your first ever loan you are applying for, having a guarantor may help you in getting the unsecured loan. Have a look at some unsecured loans Mozo has compiled together.
Let’s face it; you’re usually on a very tight budget and pretty ‘povo’ when you’re a university student! Fortunately many lending institutions recognise the financial burden university students are under by offering assistance in the form of a student loan. This loan can help purchase a laptop, textbooks and other such educational expenses. so you can avoid the stress of holding down a part time job while studying.
Compare student personal loans here!
An overdraft or line of credit personal loan is great to have in case of an unexpected emergency. It allows you to overdraw your account to an agreed amount established by the bank. You only pay interest on the money you use not on the maximum you are able to borrow.
A debt consolidation loan can help you to get out of debt sooner. By combining all your debts into one personal loan you can save on interest repayments.
Compare debt consolidation personal loans right now!
There are two options when it comes to paying interest on a personal loan and sorry to be the bearer of bad news but you cannot avoid it. You can choose between a fixed and variable interest rate, in the end it all comes down to personal preference. Have a read of the pros and cons of each below to help you make your decision.
A fixed interest means that the rate is locked in over the life of your personal loan. As the interest rate will not change, it makes budgeting a whole lot easier. Plug some numbers in the Mozo budget calculator!
A variable rate loan can change at any time during the term. As the interest rate can fluctuate repayments on this type of loan will go up and down.
The duration you take out a personal loan for will depend on why you need the loan and your financial situation. Personal loans usually have a standard minimum term of 1 year with a maximum of seven to 10 years. Be aware, the longer the term of the loan, the more you will pay in interest.
Play with our personal loan repayments calculator to see what term would work for you.
Fair enough if you’re feeling a little overwhelmed at choosing a personal loan, there’s a lot to take in. So here’s a list of features to consider, helping make the decision a little bit easier.
Low fees: Avoid or keep to a minimal, upfront, ongoing, or early repayment fees.
Borrowing: Usually the minimum amount is $2000 the maximum will depend on what you can afford. To help figure out what you can borrow try out our personal loan repayment calculator.
Flexible repayments: Make sure your personal loan provides you with the flexible option of an extra repayments facility…you never know when you may find yourself with some extra cash.
Redraw facility: Once you've paid off a portion of your bank loan, you can draw that money back out again. This feature may be handy to have for when an unexpected bill or health issue pops up.
Fixed or variable interest rate: Have a read above for the pros and cons of each.
Click here to compare personal loans on Mozo!
1. How are the repayments calculated?
It’s based on the full amount of your loan, related fees, the loan term and interest rates.
2. When do I make repayments?
It’s determined when you set up the loan; weekly, fortnightly, monthly or an agreed date.
3. How do I make repayments?
Direct loan repayment, direct debit, phone banking
4. What happens if I make my repayment late?
You have a steady income but like most Australians you still need and would like more money! Do you pull out the plastic or call on a personal loan? There is no right or wrong, it depends on your financial situation and which one works out to be cheaper for what you need/want.
|Personal Loans||Credit Cards|
Lower interest rate
Higher interest rate
Larger purchases such as a car or renovations
Smaller purchases such as clothes or entertainment
Repayment schedule, debt repaid by end of term
Minimum repayment each monthly statement
Limit on what you can borrow
Open ended debt-spiral
Application fees and annual fees
Rare to have application fee but likely to have expensive annual fees
Learn more about loan vs credit
When it comes to personal loans, one of our biggest pieces of advice is to read the fine print! There are lots of sneaky fees, you don’t want to skip over any of them as they will affect your budget and repayments. Keep an eye out and where possible, shop around, talk to your bank/credit union and try and avoid the following:
It’s a competitive world out there when it comes to reputable lenders. But thanks to the online world, choosing a personal loan provider is a lot easier; Mozo allows you to compare 140 loans from 43 financial providers. Check out the comprehensive list that could help you save thousands by finding the best provider with lower interest rates and cheaper fees.
Big Banks: Don’t usually offer the best interest rates and have higher fees and charges. But they’re reliable, personable and efficient. The big banks also offer generous higher loan limits and more generous personal loan terms.
Credit Union: Non-profit financial institutions so are able to offer more competitive rates and fees to stand out from the crowd.
Peer to peer lender (P2P): With fewer overheads P2P loans offer standout rates, low fees and access to funds on the same day. Peer to peer lenders generally use a tier based pricing system, which means they reserve their best interest rates for creditworthy customers. Compare peer to peer loans.
Click the link to familiarise yourself with the pros and cons of personal loan providers.