If you are looking to borrow money for a personal reason, like to purchase a new car, get married or even take a once in a lifetime holiday, then one of your best borrowing options could be a personal loan that you pay back over a period of time.
Of course when you’re borrowing money from a bank or other financial services provider like a peer to peer lender, you’ll be paying interest (and possibly fees) on any money that you borrow.
If this is your first time getting a personal loan or you’re just in need of a bit of a refresher course, we’ve outlined some of the key things you’ll need to consider below.
Key features of a personal loan, what are they?
There are generally three main aspects to a personal loan; the interest rate, the fees and the loan features. We’ll go in each one a little more detail here:
- Interest rate: The interest rate is the amount of interest you’ll pay for every dollar you borrow. So if you borrow $100 and your interest rate is 10%, you will need to pay back $110. With personal loans, there are variable interest rates and fixed interest rates (more on this below).
- Fees: With personal loans there can be a range of fees. Some of the fees are upfront fees like application fees, others needs to be paid on an ongoing basis like a monthly service fee. Other fees are usually charged when you either miss a payment or decide to terminate your loan.
- Loan features: These range from a choice of repayment options like weekly or monthly repayments, through to the ability to make extra repayments or access to a redraw facility. The key with loan features is that you only want to pay for the ones you’ll use. No point paying a higher interest rate for an extra repayments facility if you’re never going to use it.
TOP COMPARISON TIP: If you want to quickly know how much a particular personal loan charges in fees compared to another, check out the comparison rate displayed above. This will give you the true cost of a loan - including both the interest rate and any fees - so that you can properly compare personal loans.
Is a fixed rate or variable interest rate better?
One of the major decisions when taking out a personal loan is whether you want it to be on a fixed or variable interest rate. Fixed rates are generally higher than their variable compatriots because the lender is affording you the certainty of knowing exactly the rate you’ll pay over the life of the loan. And while you can usually snag a lower variable interest rate, there is the chance that it could go up - if funding costs go up, for example - at some point during your loan term, meaning your personal loan ends up costing you more than first anticipated. Choosing between these two is really up to you and the lender you choose to go with. If you’d like to know exactly what your monthly repayments will be, a fixed rate personal loan could be right for you.
How much will my repayments be on a personal loan?
That’s the million dollar question because your repayments will depend on, the interest rate, the loan term and your repayment frequency. Luckily for you, Mozo’s personal loan repayments calculator can give you a solid idea of whether or not you’ll be able to meet your weekly, fortnightly or monthly repayments based on the loan amount, term and interest rate you’re able to secure. Here’s how it works.
Sally is looking to escape Sydney for a few months and is setting off to South East Asia for a few relaxing weeks away. The trip will cost her $2,500 and after some research into the market, she has found a personal loan with an advertised interest rate of 8.50% that she plans on paying for three years. Using our personal loan repayments calculator, Sally finds out that she’ll have to contribute $79 a month to her repayments, amounting in $341 in interest over the three years.
Can I use a personal loan to upgrade my home in Sydney?
Yes, personal loans can be used for renovations or property upgrades like landscaping, painting or even updating a 70’s Sydney kitchen. If you’ve already got a home loan however, you might want to consider refinancing as a finance option especially if you are looking to borrow a large amount.
In fact, if that’s the reason you’re in the market for some finance, why not read up on all things home renovation loans using our fact-filled guide.
Which lenders in Sydney offer personal loans?
The great news is that when it comes to getting a personal loan if you live in Sydney or anywhere in Australia for that matter is that you’ve got a tonne of choice. Generally personal loan lenders fall into three main categories:
- Big banks. Think NAB, Commonwealth Bank or Westpac as well as some of the global players like Citi and HSBC. Throughout Sydney you’ll be able to visit a local Big Bank branch to get a loan or you’ll also be able to apply for these loans online. Loans with the big banks won’t be the cheapest on the market but they do have competitive choices. One of the other benefits of a bank big is that if you need to borrow a larger amount of money, they usually have higher loan limits that some of the smaller lenders in our database.
- Customer owned banks and credit unions. These lenders generally have competitive loans in the market because unlike the bigger banks, they put their profits back into delivering low rate products for their customers.
- Peer to peer lenders. The new kids on the block in the Australian personal loan market are peer to peer players like Harmoney, Ratesetter and Society One. You’ll find that these lenders have different rate tiers depending on your credit rating so the better your credit history, the better your interest rate will be.
Is there anyway to make sure my personal loan application is approved?
Unfortunately, there is no surefire way to be certain a personal loan provider will give your application the all clear once you hit send. But in saying that, there are definitely a few steps to take beforehand that’ll give you the best possible chance of securing your funds quickly.
- Check your credit history. Before you decide to apply for a personal loans It is a good idea to check your credit file to make sure that everything in it is correct and up-to-date.
- Demonstrate good financial habits. In the months leading up to your loan application it’s a good idea to make sure that you can demonstrate to a lender that you’ll be able to meet the loan repayments. Start putting some extra money away into a savings account equal to the amount of money you’re looking to borrow and always be sure to pay any utility bill on time and in full.
- Give yourself a borrowing limit and stick to it: While your bank may be willing to loan you $20,000 for a new deck for your Sydney home, if you only need to borrow $10,000 stick to this amount.
What will I need to apply for a personal loan?
Applying for personal loans nowadays is quick and easy. While you can choose to visit a local Sydney branch of your chosen bank, you’ve also got the option of doing our application online. And if you’re opting for a peer to peer lender, this is the only option you’ll have as they don’t have physical branches around Sydney like other banks. When you apply for any loan you’ll generally need to provide the following info:
- Proof of identity - Your passport or NSW drivers license.
- Proof of income - Your pay slips.
- Other financial details - Assets, debts and expenses.
I don’t live in Sydney, what are my options for getting a personal loan?
Of course. In fact, personal loan providers operate all over the country, so no matter where you live you can get your hands on the cash needed to tick off important life goals. Here at Mozo we compare loans all around Australia but if you want to do a city-based search you can also check out our Melbourne and Perth loan pages.