How to make a personal loan useful over the summer

How to make a personal loan useful over the summer

The summer holidays often give us the gift of a little extra time and a bit of enthusiastic new year motivation. Which is why it might just be the perfect opportunity to get stuck into some of the items on your ever-growing to-do list.

If you’re eager to make the most of your time off but don’t have quite enough cash in the bank, you might find that a personal loan could come in handy right when you need it. Lenders offer personal loans for an abundance of loan purposes, so there’s every chance you could find one that’s right for you.

RateCity’s database offers plenty of competitive personal loans with rates currently starting from 5.35 per cent (6.21 per cent comparison rate), available to eligible borrowers for any worthwhile purpose.

We’ve put together a list of things that a personal loan might be able to help you out with this summer so you can start the new year off with a bang.

Tackling a renovation project

It’s safe to say we’ve all spent a lot more time at home this year than we likely normally do. Which means you’ve probably also had more time to notice a thing or two within your space that could do with an update.

Whether it’s a complete kitchen remodel that you’re after or the interiors just need a fresh lick of paint, a personal loan could be a viable option to get the project underway.

Reducing your carbon footprint

Speaking of renovating your home, if you’re looking to make updates of the eco-friendly variety, you might be interested to learn that there’s a specific type of personal loan for that purpose.

A green personal loan is a financial product designed to fund projects that are considered to be environmentally sustainable – such as installing solar panels or investing in energy efficient white goods.

Green personal loans also often have more competitive interest rates than regular personal loans, as lenders incentivise borrowers to ‘go green’. RateCity’s database offers green personal loans with rates currently starting from as little as 4.69 per cent (4.69 per cent comparison rate).

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Consolidating your debts

Having financial goals set for the new year is always a good idea, especially when it comes to paying down debt. If you’ve got more credit cards in your wallet than you’d like – plus maybe an existing personal loan or car loan on top of that – you could consider consolidating all of your debts into a single personal loan.

A debt consolidation personal loan could help you save money on interest charges as personal loans typically offer lower interest rates than credit cards. It could also help you avoid paying multiple account fees and make your budgeting more manageable with a single repayment.

When considering a debt consolidation loan, be sure to factor in additional charges such as break fees and establishment fees when calculating whether it’s the right move for you.

Taking a break

With state and territory COVID-19 border restrictions easing in recent weeks, it could be the perfect time to take the family on a much-anticipated holiday.

Taking out a personal loan to fund your trip could allow you to spend your time off how you like. And if it’s a relatively inexpensive getaway, you might be able to choose a shorter loan term in order to pay it off quickly.

Locking in your wedding plans

The emergence of the coronavirus pandemic might’ve put a stop to your wedding planning, but the gradual easing of restrictions could have you feeling confident enough to get back on track.

If you want to secure your first pick of wedding vendors, you’ll typically need to get in early. This generally means paying deposits well ahead of your big day, and potentially also before you’ve managed to build up enough savings. A personal loan could help with these early expenses, as well as other costs along the way, and ensure your nuptials are celebrated exactly how you envisioned.

If you are considering making use of a personal loan this summer, be sure to do your due diligence and ensure it’s the right choice for you. Search and compare your options, and consider speaking to a financial advisor for information specific to your personal circumstances.

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Learn more about personal loans

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.

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.

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 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.

Which lenders offer bad credit personal loans?

Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.

Can I get a personal loan if I receive Centrelink payments?

It is hard, but not impossible, to qualify for a personal loan if you receive Centrelink payments.

Some lenders won’t lend money to people who are on welfare. However, other lenders will simply consider Centrelink payments as another factor to weigh up when they assess a person’s capacity to repay a loan. You should check with any prospective lender about their criteria before making a personal loan application.

What interest rates are charged for personal loans?

Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.

For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.

For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.

Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.

Can I get an easy/instant personal loan?

Some lenders are able to approve applications with little documentation and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.

How are personal loans regulated?

Personal lenders in Australia are regulated by ASIC (the Australian Securities & Investments Commission) and must follow responsible lending rules. That means they can’t lend money without making “reasonable inquiries” about a borrower’s financial situation and ensuring the loan is “not unsuitable” for them.

What are the pros and cons of bad credit personal loans?

In some instances, bad credit personal loans can help people with bad credit history to consolidate their debts, which can help make it easier for them to clear those debts. This is because the borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate and potentially fewer fees.

However, this strategy can backfire if the borrower spends the loaned funds instead of using it to repay the new loan. Another disadvantage of bad credit personal loans is that they have higher interest rates than regular personal loans.

What is a secured bad credit personal loan?

A bad credit personal loan is 'secured' when the borrower offers up an asset, such as a car or jewellery, as collateral or security. If the borrower fails to repay the loan, the lender can then seize the asset to recoup its losses.

How do you get a bad credit personal loan?

You can get a bad credit personal loan by applying directly to a lender, by going through a mortgage broker or by using a comparison website like RateCity.

How much can I borrow with a personal loan?

It’s unusual for a lender to provide a personal loan of above $100,000, although there is no formal limit. As with all lending products, each lender sets its own policies, while each borrower is assessed on a case-by-case basis.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.