Personal Loans

Types of Personal Loans

Personal loans have been the most popular form of debt for consumers outside of home mortgages. It is estimated that more then 75% Australians will have taken out a personal loan at some point in their life. Most personal loans are used by people who need money to buy something they want when they really can't afford the cash outlay right now, but who don't want to put off any longer. Personal loans can be taken out from banks, credit unions and financial institutions.

Uses of Personal Loans

Cars: The car is one of the most popular uses of personal loans. Personal loans for cars can vary from a few thousand up to $30,000 or more. Personal loans for purchasing a car, whether new or second hand is a useful credit tool as personal loans can be unsecured, that is, it may not need bricks and mortar collateral security. It can be obtained with the backing of a personal guarantee (a default could result in the repossession of your car however).

Getting the car you've always wanted, a new lounge suite or renovating your kitchen are all good reasons to apply. You can even get cash to fund your dream wedding.

Furniture: Furniture is one of those expenditures which often requires an outlay of thousands of dollars and hence needing to borrow money via a personal loan or credit card. A personal loan can be a more sensible alterative as even unsecured loans are usually cheaper in terms of interest payments than a normal credit card.

Home Renovations: Given the huge and increasing appeal of buying homes to renovate, Australians are borrowing more money than at any time in history for the purposes of home renovation. A simple makeover can cost a few thousand while a kitchen and bathroom makeover can cost more than $30,000. Personal loans are a solution for small amounts as the cost of servicing a small loan is preferable to taking out a long term mortgage-related loan.

Emergencies: Every family experiences emergencies – the broken sewer, the unreliable electrical wiring, the broken transmission on the car; dental costs. The lists goes on. A personal loan is often the optimal solution in such cases.

Debt Consolidation: Many people will at some time consider getting on top of your repayments by consolidating all your outstanding balances into one low-rate loan. So you only pay one repayment per month, rather than different bills for store cards, credit cards or store finances.

Choice of a loan amount

Unsecured loans range from $4,000 to $50,000, secured loans and car loans from $4,000 to $100,000. Secured loans offer lower interest rates because the lender will register an interest in the car or items purchased. In the case of unsecured personal loan however, no security is required for the loan, so the amount a consumer can borrow is less and the interest rate higher.

Features

• Loans can be from 1 to 7 years. The longer term for larger amounts; hence keeping a comfortable level of repayments.
• Most loans can be repaid by organising a direct debit to your bank account, or by using the BPAY facility or a direct debit authorisation.
• Fixed repayments: As distinct from credit cards you know the exact repayment amount as the interest rate is fixed for the term of the loan. This is irrespective of interest rates rising or falling.