Australian Personal Loans
What is a Personal Loan
A Personal Loan is a finance product where you are lent money which you can use in any way you see fit. It is provided by most of the major banks and lending institutions in Australia and according to the contract that you sign must be paid back (along with interest of course) within a given number of years.
Types of Personal Loans
With the majority of lenders you willl have the choice of 2 types of personal loans in Australia. They are :
- Unsecured Personal Loans - This is where the finance company lends you money and you don't have to provide any other asset as collateral or security for the loan.
- Secured Personal Loans - This is where a financier lends you money and you have to provide an asset that you own (ie: car, house, etc) as security for the loan.
Both loan types has its own advantages and disadvantages and, as the name suggests, the loans can be used for any personal thing that you like. Some common uses for personal loans in Australia include taking a holiday, paying for a wedding, buying furniture and debt consolidation. You should be aware that secured personal loans will have a lower interest rate because it represents a much lower risk to the lender.
Who are Personal Loans Suitable For
Personal Loans are suitable for anyone who has a good credit history but needs access to more money in a relatively short period of time. Also it is best if you are employed in a full-time job and have had uninterrupted employment for a number of years.
One of the major benefits of personal loans is that there are limited requirements in the approval process, meaning that they don't take as long to obtain as other types of loans. For this reason personal loans in Australia always have a set maximum amount that you can borrow, but you are free to spend the money on whatever you want to. For these reasons a lot of people use personal loans for starting up a small business, covering education expenses and even small home renovations.
Australian Personal Loan Tips
- A financially savvy thing to do is to work out the minimum amount that you actually need to borrow and even use some of your savings in order to limit the amount of your borrowings. This is because personal loans generally have much higher interest rates than most other loans. If you do this you can save lots of money on interest repayments over the course of the loan.
- It is also a financially prudent thing to spend the money that you have borrowed on a tangible asset that has a value attached to it, for example a boat or a bike that could be sold if required to help pay back the loan. For this reason it is generally not a good idea to take out a personal loan for a holiday, as after the vacation you will have nothing to show for your money except lots of interest repayments.
- When you are looking at what to spend your persaonl loan money on it is advisable to not go for something that is beyond your ability to repay. A better idea is to work backwards by calculating exactly how much money you can afford to borrow and then find products that are within your budget.
If you are unsure about the meaning of some of the terms or abbreviations used by lenders then you can check out the personal loan terminology page, which has a detailed explaination about some of the more confusing aspects of getting a personal loan.
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