What can I use a personal loan for?

What can I use a personal loan for?

Depending on the lender and your financial situation, you might be able to borrow up to $100,000 with a personal loan. But what could you use it for?

One way you could use a personal loan would be to consolidate debt. Here’s how a debt consolidation works:

  • Problem – you have two or more debts that have high interest rates
  • Solution – you take out a personal loan, at a lower interest rate, to pay off those debts
  • Result – you’re left with just one debt and a lower interest rate

For example, imagine you had the following debts:

  • Credit card #1 – debt $10,000, interest rate 19.99 per cent
  • Credit card #2 – debt $6,000, interest rate 18.50 per cent
  • Car loan – debt $13,000, interest rate 9.75 per cent

Now imagine you took out a $29,000 personal loan ($10,000 + $6,000 + $13,000), at 6.99 per cent, to pay off those three loans. You’d still owe the same amount of money, but now your interest repayments would be reduced and you’d have just one loan to manage

10 ways to use a personal loan

  1. Debt consolidation
  2. Car
  3. Boat
  4. Wedding
  5. Holiday
  6. School fees
  7. Medical bills
  8. Moving
  9. Renovating
  10. Fitting out the home

Other ways to use a personal loan

Personal loans are often used to pay for major expenses like:

  • Weddings
  • Holidays
  • School fees
  • Medical bills

You could also use a personal loan to pay for home-related expenses:

  • Moving
  • Renovating
  • White goods, electrical goods, furniture

Some lenders will let you use a personal loan to buy a car or a boat – although others will make you use a car loan instead.

The key features of a personal loan

If you’ve decided to take out a personal loan, there are a few more questions to answer.

What loan size do you want? As a general rule, lower is better, so you can get out of debt as quickly as possible.

How often would you like to make loan repayments? Weekly, fortnightly or monthly?

What loan term would you like? Generally, personal loans last from one to 10 years. A longer loan term means your regular repayments are lower, but your total interest bill over the life of the loan is higher.

You also need to decide on the type of loan. Secured or unsecured? Variable or fixed?

5 questions to ask before taking out a personal loan

  1. How much will I borrow?
  2. How often will I make repayments?
  3. How long will my loan be?
  4. Will my loan be secured or unsecured?
  5. Will my loan be variable or fixed?

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Learn more about personal loans

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

What are the pros and cons of debt consolidation?

In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay an existing $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 20 per cent.

However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

Can I get a bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.

Can you get an emergency loan on Centrelink?

When many lenders assess a borrower’s income to determine whether they can afford a loan’s repayments without ending up in financial stress, they may not count Centrelink payments as income for this purpose.

Before applying for an emergency loan, it may be worth contacting a potential lender to find out if they accept applications from borrowers on Centrelink.

Can I apply for a quick loan online?

While some lenders will require you to provide paperwork in person, many lenders will allow you to make an application for quick personal loan online. You’ll still need to provide information on your identity, income, and loan purpose in most cases.

What do credit scores have to do with personal loan interest rates?

There is a strong link between credit scores and personal loan interest rates because many lenders use credit scores to help decide what interest rates to offer to potential borrowers.

If you have a higher credit score, lenders will probably classify you as a lower-risk borrower. That means they’ll be keen to win your business, so they may offer you a lower interest rate if you apply for a personal loan.

If you have a lower credit score, lenders will probably classify you as a higher-risk borrower. That means they might be concerned about you defaulting on the loan and costing them money. As a result, they might protect themselves by charging you a higher interest rate.

Are there low doc personal loans?

Self-employed borrowers may be eligible for low doc personal loans, which require less documentation in their application process than many other personal loan options.

It’s important to remember that though low doc personal loans may require less paperwork, you may need to provide additional security, or pay a higher interest rate.