Latitude offering lower rates for home owners

Latitude offering lower rates for home owners

Need a personal loan? If you own your own home and have an excellent credit rating, you may be able to secure a lower interest rate.

Let's say for example, Susanna* approaches Latitude for a $22,000 personal loan to help fund her upcoming wedding.

As Susanna owns her own home, with a mortgage attached, and has an excellent credit rating, she was able to qualify for Latitude’s Low Rate Personal Loan product. This product is targeted toward safer borrowers, and so offers an interest rate that is three percentage points less than their regular Personal Loan.

Susanna chooses to secure her personal loan, rather than have it unsecured. By securing the property with an asset, she is able to knock one more percentage point off the interest rate offered.

Loan type Advertised rate Comparison rate
Low Rate Personal Loan (secured) 9.99% 11.22%
Low Rate Personal Loan (unsecured) 10.99% 12.21%
Personal Loan (secured) 12.99% to 28.99% 14.20% to 30.13%
Personal Loan (unsecured) 13.99% to 29.99% 15.19% to 31.13%

Data accurate as at 26 September 2019

Susanna may save money by paying off her loan early, but fees do apply

When she sets up the Low Rate Personal Loan, Latitude fixes the interest rate 9.99 per cent for the length of her five-year loan term.

Susanna pays a $250 establishment fee, and commits to a $13 monthly fee. Whilst these fees are small, Susanna is careful to make every repayment on time, as late repayment fees and other charges may apply.

Susanna has the option of making weekly, fortnightly or monthly payments, and decides to choose the monthly option as her salary is paid monthly.

Even though Susanna opted for a five-year term, she wanted to see if she could pay off the loan in four years, to save money.

Latitude charges an early termination fee of $300 if you pay off your loan in the first half of the term, but waives it if you pay off the loan in the second half. 

Loan term Monthly repayments (including monthly fees) Total repayments (including establishment and monthly fees)
5 years $480 $28,820
4 years $571 $27,402

Susanna plans to pay an extra $395 per month for four years, as she has calculated by exiting the loan one year early, she could save up to $1500.

But even if she can’t make the extra repayment every month, she may still be ahead overall, which should give her some breathing room if her finances get tight for a while.

Personal loans can be costly

Australians should think carefully before taking out a personal loan, as they can be costly products with many associated fees and charges.

It’s also important to compare personal loan interest rates, because there are many providers in the market, and they offer a wide variety of interest rates.

That said, the cheapest personal loan won’t always be the best personal loan; fees, features and customer service are also worth considering when you do your research.

It's a good idea professional financial advice before applying a personal loan, as a rejected application can negatively impact your credit score. 

* Susanna is not a real person. This is a hypothetical case study.

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Learn more about personal loans

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

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 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.

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.

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.

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.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

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.

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.

Is it hard to improve your credit score?

It can be hard to improve your credit score, as it usually requires sacrifice and discipline, but hard doesn’t necessarily mean complicated. Some simple ways you can give your credit score a boost include closing extra credit cards, reducing your credit card limit, pay off any loans and make loan repayments on time.

As a general rule, the lower your credit score, the more remedies you can apply and the greater the scope for improvement.

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.

What can I use a bad credit personal loan for?

Generally, bad credit personal loans can be used for the following purposes:

  • Debt consolidation
  • Paying bills
  • Buying vehicles
  • Moving expenses
  • Holidays
  • Weddings
  • Education

Some lenders restrict how their bad credit personal loans can be used as part of their commitment to responsible lending – be sure to check before applying.