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FULL ARTICLE: https://www.liberty.com.au/blog/loan-school/the-ultimate-guide-to-personal-loans
Personal loans help Australians from all backgrounds afford necessities, projects and dreams that would otherwise be out of financial reach. Most of us take out loans for our home, car, or business. But what about other expenses that come up in life? What about weddings, new babies or home renovations? You may also have opportunities for travel or personal development, unexpected increases in your living expenses, debt, or the need to help a loved one.
How much can I borrow with a personal loan?
The amount you can borrow with a personal loan depends on several factors. As with any type of loan, your lender will want to see evidence of your ability to repay. You will be able to borrow more if you have a strong credit history and a stable income. But even if you don't, some lenders can still give you a personal loan.
What is a small personal loan?
A small personal loan is generally considered less than $2,000. Called payday loans, these types of loans generally attract higher interest rates, with a short repayment period. On the other hand, people take out larger personal loans for large sums for which they do not have time to save. Most major lenders have minimum personal loans of around $5,000.
What is an unsecured personal loan?
An unsecured personal loan is a loan that is not backed by assets. The loan is approved only after the lender examines the borrower's repayment capacity. With an unsecured personal loan, the lender has no assets to sell to recoup losses if the borrower defaults. Because the risk to the lender is higher, interest rates on unsecured personal loans tend to be higher than on secured loans. However, for those with good credit, rates can remain very competitive.
What is a guaranteed personal loan?
A secured personal loan is a loan taken out against an asset that serves as collateral. With a secured personal loan, the lender can recoup its losses if the borrower defaults by selling the asset used as security for the loan. Secured personal loans are mainly used to purchase new or used motor vehicles. Interest rates for secured personal loans tend to be lower than unsecured personal loans because there is less risk for the lender. Unlike an unsecured loan, the lender has recourse to the underlying asset if the borrower becomes unable to repay the loan.
What is the interest rate for a personal loan?
Personal loan interest rates will fluctuate based on market conditions. But the specific interest rate offered when taking out a personal loan generally remains the same throughout the life of the loan. Plus, with fixed repayments, you can budget more easily. It is important to note that some lenders take a unique approach to their personal loan offering. This means that even if you have an exceptionally strong credit profile, your interest rate will be the same as everyone else's. This may also mean that if your financial situation is not ideal, the lender may decline your loan application if it does not meet their narrow risk profile.
Can I get a personal loan if I have bad credit?
Yes, some lenders will approve you for a personal loan even if you have a bad credit history. Traditional lenders are more likely to deny personal loan applications unless the borrower has a certain minimum credit score.
How long does it take to get a personal loan?
The time it takes to get a personal loan depends on your lender's policies, turnaround time and technology offering. More and more Australians are obtaining personal loans through online loan centers. Applicants no longer need to gather all their financial documents, go to the bank in person, sit down with a representative and explain why they need the money and how they are going to pay it back.
Will applying for a personal loan affect my credit score?
Getting an interest rate quote online for a personal loan will not affect your credit score. This is usually a very quick process and only takes a few minutes. However, once you are ready to proceed and submit a formal application, that is when the lender will conduct a formal credit inquiry.
How to apply for a personal loan?
Before applying for a personal loan, do your research. Instead of just going to the same bank you've always used, take advantage of different financial comparison websites that compare different lenders and products. From there, you can check several lender websites and see if they offer personalized interest rates online.
Have questions? Visit https://www.liberty.com.au/about-us/contact-us
To read the full article: https://www.liberty.com.au/blog/personal-finance/the-ultimate-guide-to-personal-loans
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