The benefits of a personal loan
What are the main reasons to choose a personal loan when it comes to borrowing money?
Lower interest rates
Personal loans often have lower interest rates than other lending methods, such as credit cards. If your make a major purchase using funds from a personal loan, you may pay less in interest charges.
- Is it better to take out a personal loan or use my credit card? Find Out
Similarly to a home loan, a personal loan is repaid in a series of repayments, made over a pre-set term. This structured repayment schedule allows you to make steady progress towards clearing your debt, minimising the risk of your interest charges growing unmanageable.
- What are the pros and cons of personal loans? Find Out
How to get the best deal on your personal loan
Identifying your needs, doing your research and shopping around can all help you uncover the best personal loan options for you:
1. Identifying your needs
What do you need a personal loan for?
- Are you looking to make a major purchase?
- Do you need flexible access to funds?
- Would the regular and consistent repayments of a fixed interest rate benefit your budget?
- Would you prefer the flexibility of a variable rate personal loan?
Keep in mind that not all personal loans can be used for all purpose, such as debt consolidation.
Personal loan application checklist
Follow these steps to compare personal loan options and select a personal loan that suits your needs:
- Work out the amount you want to borrow: Some personal loan options have minimum or maximum amounts, so the amount you plan to borrow could limit your personal loan options.
- Calculate how much you can afford to make in repayments: The more money you borrow, the higher your repayments will be, unless you opt for a longer loan term.
- Work out how long it will take to pay off: The sooner you can pay off your loan, the less total interest you’ll be charged, though your repayments may be less affordable. You may also have options to make weekly, fortnightly, or monthly repayments, which may affect how much you pay in interest on your loan.
- Decide between a secured and unsecured loan: Secured personal loans are more likely to have lower interest rates, as they usean asset as security, such as the car you're buying, or equity in a property. Unsecured loans don’t require you to provide security, but are more likely to have higher interest rates.
- Fixed or variable?: Fixed interest rates keep your repayments consistent, for simpler budgeting. Variable interest rates offer more flexibility, and your repayments may go up or down if your lender raises or lowers its rates.
- Compare options online: Low interest rates and low fees are important, but so is finding the right features that match your finances.
- Prepare to apply: Organise any documentation and paperworkthat'srequired to support your personal loan application.
- What documents do I need to get a personal loan? Find Out
Types of personal loans
Secured, unsecured, variable, fixed? Having lots of options can sometimes be confusing, but it’s important to do your research and pick a personal loan that is going to suit your needs. A few minutes of reading could also save you some money.
We’ve broken down the options so you can quickly and easily identify which personal loan types are likely to meet your requirements.
If you’re purchasing a new car or similar large asset, then a secured personal loan may be for you.
In this type of loan, an asset (often the asset you’re purchasing) is used as security against the loan. If you were to default on your repayments, the financial institution would have the authority to repossess your asset, sell it, and use the money to cover the cost of your unpaid debt.
Because secured loans tend to be less financially risky for lenders, they’re more likely to have lower interest rates than some other options.