By Jack Han
February 8, 2010
Personal loans are on the rise, as Australia’s economy steadies toward a full recovery. However, major banks are the ones enjoying the fruits of consumer confidence, while the rest are left with more to desire.
Recent lending statistics show that fixed term borrowing for the purchase of cars, boats and travel has increased by 38 percent since November 2008 to November 2009, where it reached its lowest point during the financial crisis.
However, the majority of the growth has been seized by the banks, who recorded an increase in personal lending of 57 percent for the same period, while non-banks saw personal lending take a dive of 13 percent.
In particular, new car personal loans rose 8 percent, boat loans 19 percent, and unsecured personal loans for the purchase of land jumped 50 percent.
This is evidence of improving employment conditions and stable lending interest rates, which are giving Australians the confidence to borrow more for major purchases. Earlier this month, the Reserve Bank decided to stall the cash rate at its current level of 3.75 percent, leaving many to believe that interest rates will rise at a much lower pace than anticipated this year.
Despite the large interest rate disparity, personal loans have the advantage of convenience over home loans, making them a very flexible lending option for those who want easier access to funds.
Lenders have caught on to the shifting tides of personal loans, and have already began competing to offer the lowest rates in a bid to attract new customers. Currently, the cheapest secured personal loans offered at RateCity are below 10 percent, while unsecured loans feature rates around 14 percent.
A difference of 4 percent on a $20,000 loan over five years translates to about $40 a month or almost $500 per year, which means that comparing personal loans is crucial for any borrower wishing to save potentially thousands of dollars on their loan.
Personal loans are best suited for borrowers who plan to repay the loan within a few years, so make sure your repayment schedule minimises the interest you owe, which could build quickly over time. The lending game is changing, but banks shouldn’t have all the fun. Take your time to compare the best offers in the market, and lock in a deal that turns the tide in your favour.