Personal Loans Melbourne 

Generally personal loans fall into two broad categories, secured and unsecured. Each have their pros and cons, so it’s worth comparing both before picking the one that will work best for you.

• Secured personal loan - A secured personal loan means you will have to provide an asset to act as collateral, like a car. So if you ever default on your repayments, the lender has the right to repossess the asset. The flip side is, secured personal loans usually come with lower interest rates.
• Unsecured personal loan - Your second option is an unsecured personal loan - while these personal loans won’t ask for security, they do generally come with higher interest rates.

Something crucial to any loan is the interest rate and while finding a low rate might be top priority, deciding on which is best for you is also important. There are two types of interest rates:

• Fixed interest rates - With a fixed rate loan, you’ll be locking in your interest rate for the whole loan term, so if you like the idea of knowing what your repayment will be, then a fixed interest rate could be right for you. Just keep in mind that if you plan to pay out your loan before the term end, you may have to pay an early break fee.
• Variable interest rates - A variable rate loan means your interest rate will change according to how the market moves, so your repayments will vary from time to time. But one of the great things about variable rates is that you won’t be charged a fee if you pay out your loan earlier, and you’ll have access to more flexible loan features.

No matter if you live in Perth or Melbourne, personal loans come with some features you’ll need to take into account before you pick your loan. They include:

Fees

It’s not uncommon for a personal loan to come with a few fees, but it is possible to cut down on how many you pay. Here are some of the fees you should keep an eye out for when shopping around on personal loans:

• Application or upfront fees - This is probably the most common personal loan fee you need to budget for. Application or upfront fees are are a one-off payment paid at the start of the loan.
• Ongoing fees - Ongoing fees are charged as an annual or monthly fee and cover the cost of maintaining your loan.
• Discharge fees -More commonly known as the exit fee, this is the fee that covers the cost of closing your loan.  
• Late repayment fees - If you don’t make your repayment by the due date, you will be charged a late repayment fee.

Repayment options

Since you’ll be paying off your personal loan for years to come, it makes sense to have a few extra loan features on your side to help you better manage your budget and save money. Some of the personal loan features you might come across include:

• Extra repayments - This handy feature allows you to make additional repayments to your personal loan, helping you cut down on interest. However, some lenders do charge a fee in order to do this and set limits on how much you can repay, so be sure to read the fine print.
• Redraw facility - If you ever find yourself stuck with an unexpected bill, having a redraw facility on your loan means you’re able to redraw the extra repayments you’ve made to help pay for life’s unexpected situations.
• Repayment frequency - With many personal loans you’ll also have the choice to repay your loan on a schedule that suits you best, either weekly, fortnightly or monthly to help you better manage your budget.

The loan term

Personal loans usually last between 1-7 years and which loan term you pick will make a difference. A shorter loan term will mean that your monthly repayments are larger, while a longer loan term will mean smaller repayments each month, but you’ll fork out more on interest in the long run.

While you will be asked to specify the purpose of the loan, whether it’s to buy a new car or to have your dream Melbourne wedding, lenders generally don’t have any restrictions on what you can and can’t use the loan for, unless you’re looking at a car loan product. However, it’s a good idea not to use a personal loan to pay for everyday expenses, like groceries or utility bills, as it’s probably not the most cost effective strategy.

A lender will mostly want to see that you’ll be able to make your repayments on time. You can use our personal loan repayments calculator to work out if a personal loan suits your budget.

This question can be tricky to answer, as each lender has both their pros and cons. You also need to consider that each type of lender works differently for different budgets. So, we’ll let you be the judge on which lender is the best choice for you.

The big banks

We all know the big banks, Westpac, ANZ, CommBank, etc. One of the big benefits of going with a big bank is that you’ll get to visit a branch and speak to a bank manege face-to-face. You also might be offered more generous personal loan terms and have access to higher loan limits. The downside is that big banks also usually mean big rates and big fees, so you’ll need to consider whether your budget would be able to manage.

Credit Unions

Think of credit unions as an alternative to a traditional lender because they’re not for profit organisations. This means you could be offered more competitive rates and fees, since these organisations tend to pass on their profits to members. Which brings us to the catch with credit unions, in order to have access to a personal loan, you will have to become a member and pay a small fee.

Peer to peer lenders

Last up are peer to peer (P2P) lenders, where strangers help strangers with their spending needs. One of the big benefits you’ll find with peer to peer lenders is the competitive interest rates and lower fees. However, we should mention that these competitive interest rates are often reserved for the most creditworthy customers. P2P lenders also have lower borrowing limits of up to $30,000 and short terms of up to 3 years.

Although personal loans can help you fund big ticket items, there are a few traps you’ll want to avoid, such as:

• Borrowing more than you need - So you’ve planned a $50K reno and then decide to add another $10K on top of it for a holiday, while it sounds fine, just remember, the more you borrow, the more interest you’ll pay.
• Spending money elsewhere - If you find that you have money left over, it can be tempting to splurge with a shopping trip. Instead of falling into this trap after you’ve hit your spending goal, put the money back into the loan in one lump sum repayment. That way, you’ll be debt-free faster and reduce the interest you pay.
• Paying more interest than necessary - You don’t have to take the first personal loan deal you see, especially if it’s possible to find a better rate elsewhere. Do your research by shopping around on personal loans so you don’t get stuck paying more than you need to.
• Being late with repayments - This an easy mistake to make when paying your loan off, but slipping off can really add late repayment fees to your bill. To avoid this, set up a direct debit through your online banking app so you never miss a payment.

So you’ve found the perfect loan and you’re ready to apply, now you’ll need to gather all the necessary documents to lodge your application. While every lender is different, some of the most common things you’ll need are:

• Proof of income - Lenders will want to see that you have a steady income that you’ll use to pay your loan off. This usually means having payslips or a tax return to show.
• Proof of savings - Most lenders also need to see proof of genuine savings, this shows that you can be responsible with money. Genuine savings are proof that you’ve been making regular deposits into your savings account over a period of time.
• Other liabilities you might have -This is to determine how much of a risk you are and can mean your mortgage or credit card debt.