Unsecured Personal Loans
What are Unsecured Personal Loans
You can get unsecured personal loans from nearly all major banks, credit unions and building societies in Australia. An Unsecured Personal Loan is where the lender gives you a limited amount of money and you don't have to provide any other asset as collateral or security for the loan. You will, of course, be required to pay back the amount of the loan, along with interest charged at a specific rate, over a set number of years.
Just because you have not provided any asset as security for the personal loan does not mean that you are not liable if you get behind on your loan repayments or actually default on the loan altogether. It is more than likely that the bank of finance lender that you borrowed money from will commence legal proceeding against you. In this situation you will generally be forced by the courts to pay back the amount of the loan, along with possible legal costs, directly from your wages.
Common Unsecured Personal Loan Uses
Once you have been approved for a personal unsecured loan you can literally spend the borrowed money on whatever you like. Some of the more common uses for unsecure loans include :
- Taking a family holiday.
- Buying new furniture for your house.
- Paying for a wedding.
- Paying for school, education or university expenses.
- Buying shares for investment or avoiding a margin call.
- Upgrade your property with home improvements or landscaping.
- Debt consolidation to repay your existing bills and debts that have a very high interest rate, like store or credit cards.
- Buying an older car where you cannot get access to a standard car loan.
- Buying a caravan, motor home or boat.
Who are Unsecured Personal Loans Suitable For
If you have a good credit history and need access to money in a hurry then an unsecured personal loan is suitable for you. These loans have a higher interest rate than other loans because their is no security provided to the lender, but on the plus side they don't take long to obtain because there are limited requirements in the approval process. For this reason unsecured personal loans always have a maximum amount that you can borrow.
For the majority of people who apply for a personal unsecured loan there is not too much to worry about and the loan is approved within a few days. However, there are a number of different groups of people for whom personal loans are much harder to obtain. Each of these groups are outlined below, along with a description of what they can do to increase their chances of a successful application.
Unsecured Personal Loans With Bad Credit
A lot of people have a bad credit rating or a black mark on their credit history. It could be something as simple as not paying a household bill through to a serious loan default. A bad credit rating can really effect your ability to borrow money, especially from the larger bank lenders because they see you as a high risk customer.
Even with a bad credit history you can still get an unsecured personal loan, however you will have to get it from one of the smaller lenders and you will have to pay an inflated interest rate because you are perceived as a higher risk than everyone else.
If you are struggling with your debts and do not have any equity in your home or any other asset to secure a loan with then you might want to consider a government initiative known as a debt agreement. Debt agreements are a flexible alternative to bankruptcy and can be applyed for if you are insolvent (ie: cannot pay your debts). A debt agreement is a negotiated compromise with your creditors that helps you to consolidate the debts, stop more interest from accruing and puts in place regular payments out of your income to the creditors.
Unsecured Personal Loans For Pensioners
If you are retired or an aged pensioner then you will find that you have much greater difficulty in obtaining a personal loan. This is generally because you no longer are able to generate a substantial income, and to the banks this places you into a higher risk category. Even if you do successfully get a loan then it is possible that some of the better deals in the market are not available to you.
The best way that you can get around this is to make you personal loan application as strong as possible by highlighting your ability to service and make the repayments over the entire term of the loan. If you can show that you are able to pay back the loan or even prepay the interest then you unsecured personal loan application has a good chance of succeeding.
Unsecured Personal Loans For Unemployed
If you are unemployed then you will find it very difficult to get a loan from the major bank lenders. It is however possible to find unemployed loans that will solve your monetary problem even if you don't have a job at the time of application. You will be able to do this by applying for finance from one of the smaller lenders in the market. Alternatively a better solution than calling lots of lenders to find out who is willing to loan you money is to use a finance broker. They should know from experience which lenders you can get a peronsal loan from based on your current financial situation.
Another product that may be right for you if you are unemployed is a no doc loan. This type of loan is ideally suited for applicants who have lots of assets, but cannot produce documentation to verify their income.
Unsecured Personal Loans For Self Employed
When you are self employed, applying for a loan can be time consuming and overwhelming, especially when you do not meet the bank's strict criteria because being self employed you work unpredictable hours and don't have a regular income. For this reason self employed people should look towards the range of low doc loans that are available on the marketplace.
Low doc loans are fairly straightforward and are designed for people who are unable to produce tax returns or provide the required financial statements at the time of application. You can generally borrow from a few thousand dollars to $100,000 with most lenders, making low doc loans perfect for self employed people who want to consolidate existing loans or renovate their family home.
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 an unsecured personal loan.