Personal loans from banks
Australian banks have paved the way when it comes to offering personal loans, although non-banking institutions also offer similar facilities.
What are personal loans from banks?
The banking industry was deregulated in the 1980s and since then competition has increased significantly. This has prompted many banks to lower their interest rates. All this is good news for you, the customer, as you have not only increased choice when seeking a personal loan but also a wider range of lenders from which to choose. Often personal loans from banks offer an excellent alternative to non-banking institutions. Banks must hold a banking licence and are required to conform to the specific regulations and rules laid down by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
Why do people use personal loans from banks?
There are a number of reasons why you might want to apply for a personal loan from a bank:
- A personal loan can be a very flexible way to manage your finances, with opportunities to link it to other types of accounts, for example transaction or everyday accounts;
- Banks charge fees and set rates, however, it’s often possible to negotiate these, which can work to your advantage;
- You can use a personal loan for a variety of reasons, from supporting a student to making repairs to your home or buying a new car.
What are the main features?
Individual banks offer different products, so it’s always best to enquire about specific features you’re interested in. You might want to know, for example, whether the financial institution will charge you extra if you pay your personal loan off early. You might also want to check if they will allow you to make flexible repayments, including occasional overpayments to reduce the costs of the loan. Some banks permit interest only payments and often there are rules applicable to the reason you are taking out a personal loan. Other banks offer redraw facilities but you should be aware they might charge you for this feature.
What are the pros and cons of personal loans from banks?
Applying for a personal loan is more straightforward than it used to be with many lenders offering online access. As a result of the formal regulations you can be confident that the bank will operate within the law and that your accounts will be secure.
You should compare a variety of personal loan offers from banks just as you would compare other financial products such as savings and everyday accounts. It’s important to check that interest rates quoted by the various banks you are comparing are for the same amount and over the same period of time. The same is true when it comes to checking fees for loan application and settlement; be aware that additional charges may be made, such as an annual or monthly fee.
Banks can offer you a larger number of products than non-banking lenders, so you may well get access to additional linked items such as a credit card or transaction account.