Are you looking for financial solutions to cover the cost of a holiday, wedding, or brand-new car?
A personal loan could help make your dreams a reality. Of course, it is vital that you do some prior research before diving in and taking out a loan.
To help you get to grips with the world of personal loans, we’ve put together a few golden rules to follow..
1. Think carefully about what you want to use the loan for
There is a wide range of financial products on the market to suit different situations. A personal loan may not be your best option depending on your requirements.
If purchasing a vehicle, you may look at a secured car loan where the loan is secured against the vehicle. Unsecured personal loans, on the other hand, offer financial solutions that aren’t tied to a security asset such as a house or car.
These loans typically come with higher interest rates than secured loans but may be easier to get approved. They are commonly used to cover travel and debt consolidation costs.
When you speak to a finance broker, they can help you determine whether a personal loan is the best fit for your requirements.
2. Pay attention to interest rates
Interest rates will depend on various factors including your personal risk profile and vary for each lender. Usually, loans secured by assets have lower interest rates than unsecured loans.
While the interest rate is not the only factor to consider when taking out a loan, a lower rate will generally reduce the total cost of the loan.
3. Check eligibility requirements carefully
All loans come with a set of eligibility requirements. Some basic requirements include:
• You must be 18 or older
• You must provide transparent information about your current financial situation
• You must meet income requirements
• You are a permanent Australian resident, or you have acquired a non-resident visa that allows you to work/reside in Australia
Once your application has been submitted to a financial institution, they will check whether you meet their relevant lending criteria for your desired loan.
4. Check the cost of loans fees
Every loan comes with a range of associated fees. Some fees will need to be paid as soon as you take out the loan. Some lenders may charge you an ongoing service fee. There are also other fees you may only be required to pay if you fail to cover an instalment. Typical fees include:
• Set-up fees
• Servicing fees
• Early exit fees
• Early repayment fees
• Loan withdrawal fees
• Insurance costs
Make sure to factor in these costs when doing your loan calculations.
5. Make a repayment plan
Before you consider taking a loan, remember to meticulously plan how you will repay your debts. Consider questions such as:
• Do you have a regular income stream that means you can comfortably cover monthly costs?
• Will you be repaying in weekly, fortnightly or monthly instalments?
• Do you need the total loan sum? Can you afford to opt for a smaller loan by providing a deposit?
Minimizing your loan repayments could save you money in the long term.
6. Remember to shop around
The loans market is huge, with a wide array of financial service providers offering products for all types of purposes.
It’s worthwhile shopping around for the best deal before making any commitments. Or you can save time by going directly to a broker like Credit One who can compare different options for you.
Remember, if you apply directly to a lender they will notify a Credit Reporting Agency that you’ve applied for finance. The more applications you submit can adversely affect your credit score.
7. Increase your repayment frequency
Once you have secured a loan, it may be worth increasing the amount and frequency of instalments at some point.
If you think you can comfortably increase your payments and your loan term allows it, increasing your repayment frequency could make your loan cheaper in the long term and save you money
Start your loan search with Credit One
If you’re looking for a personal loan to fit your circumstances, begin an enquiry on the Credit One website today.
