You click open your savings account only to discover there’s not quite enough money sitting there to fund your much needed new set of wheels. There’s no need to turn sour as there’s a personal loan out there for you, one which will help you drive away with that dream car. A personal loan is a means of accessing finance through a provider such as a bank, credit union or peer to peer lender. You can take out a personal loan for just about anything including a wedding, holiday, home renovations or medical expenses. Depending on your purpose for taking out a personal loan and your financial situation will help determine if you go with a variable or fixed rate. This guide goes into the nuts and bolts of a variable rate personal loan.
A variable rate means the interest rate on the money you are borrowing can change at any time during the term of the loan. So when market interest rates change so do your repayments on the loan. This fluctuating interest rate could work in your favour or it may not.
Pros of a variable interest rate
Cons of a variable interest rate
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When taking out a personal loan you have to choose between a secured or unsecured loan. A secured loan requires you to put up an asset as security in order to borrow money from the lender. You can offer your house, car or even jewellery as collateral but keep in mind if you fail to make repayments, the lender can take possession of your asset. With a secured loan, the lender will offer you more competitive rates and fees; you can also borrow more money over a longer period of time. Check out some great deals on secured loans.
An unsecured loan does not require you to put up an asset as security against the loan but you will need to have secure employment and a good credit rating. An unsecured loan is ideal for those people wanting to borrow a small amount of money over a short period of time. Click the link to compare and save on unsecured loans.
If you don’t deal well with change and uncertainty then a fixed rate personal loan may suit you better. The interest rate on a fixed rate personal loan will remain the same for the entirety of the term.
Pros of fixed rate loans
Cons of fixed rate loans
Competitive rate: Shop around and find a lender who is going to offer you a competitive low variable interest rate, every cent counts.
Comparison rate: Make sure you also look at the comparison rate, the ‘true cost’; this figure includes fees and charges on the loan, so it helps you calculate exactly what your repayments will be.
Extra repayments: Plenty of variable rate loans will allow you to make advanced and additional repayments without a charge, so you can pay off your debt faster.
Low fees: Keep an eye out for loans that have low application, ongoing and late fees. These administrative fees are usually lower with a variable rate loan.
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How much a provider is willing to lend you will depend entirely on your financial situation and what you can afford in repayments. Also, how much you would like to borrow may not necessarily be the same amount you can afford! An important Mozo tip - only borrow as much as you can manage in repayments.
A secured personal loan allows you to borrow a larger sum of money starting at $5000 all the way up to $100,000. You can take out a secured loan from 1 to up to 15 years. If you only want to borrow a smaller amount look into an unsecured loan, amounts start from around $5000 up to $30,000. An unsecured loan usually ranges from 1 to 7 years.
Crunch some numbers in the Mozo budget calculator.
Loan repayments can be made weekly, fortnightly, monthly or an agreed date. Exactly how much each repayment will be depends on the following:
Use the Mozo personal loans repayments calculator to do the maths for you.