You don’t risk losing any assets if you’re unable to pay. However, they do tend to have higher interests rates than secured loans. This is because they are more of a risk to the lender.
Guide to Personal Loan Comparison in Australia
Personal loans can be used for many purposes from buying expensive items to paying off debt.
You might be thinking: “is it wise to pay off a debt with another debt?” It can be. For instance, personal loan interest rates are typically cheaper than those on credit cards. So consolidating the debt from multiple high-rate credit cards into one payment can help in the long run.
Best Loans in Australia
Here are some of the best loans offers we could find:
|Name||Interest Rate (p.a.)||Loan||Features||Review|
|From 8.95% (fixed)||$5000 or more||+ No Security Required|
|From 35%||$2000 or more||+ 5 Minute Application|
How to Compare Personal Loans
Just like when purchasing a pair of shoes or a new phone, it’s best to shop around first. Comparing personal loans isn’t that hard if you know what to focus on. In this section, we’re going to be discussing the most important factors.
1. Comparison Rate
Comparison rates help you figure out the true cost of a loan. Calculate as a percentage, it includes the interest plus all the additional fees that lenders charge you for taking out a loan. The way comparison rates are calculated can differ between lenders. However, they’ll typically let you know how exactly they arrived on the figure.
2. Interest Rates
Interest rates should still be considered independently as well. Comparison rates factor in one-time fees but interest is what you’ll be charged throughout the term. Hence, it’s always best to ensure that you’re getting a competitive rate on your loan through comparison. Typically, personal loan interest rates can vary between 6% to 36%, depending on your credit score.
3. The Type of Lender
Banks aren’t the only option when it comes to getting personal loans. In fact, credit unions typically offer smaller interest rates and few fees. In addition to these, you can also find good marketplace lenders who typically tend to expedite the loan process.
If you’re thinking of approaching a marketplace lender, we highly recommend NowFinance. They offer a competitive fixed-rate at 8.95% per annum. Plus they let you borrow up to $40,000, depending on how good your credit is.
4. Loan Term
Personal loans aren’t a long term solution. Hence repayment amounts are typically larger than what you might get with a mortgage. If you are unable to pay big amounts, then you may have to seek out a lender that offers a long repayment term. However, the trade-off will be that you’ll pay way more in interest.
NowFinance offers multiple options when it comes to the loan term. You can choose from 18 months all the way up to seven years.
What if you wanted to pay off your loan quicker than the agreed-upon schedule? Here’s the thing: lenders don’t actually want you doing that. This is because the faster you repay the less they’ll collect in terms of interests. Hence, most lenders will tack on an early repayment charge. This can vary between lenders so it’s best to do your research beforehand.
All lenders will charge an upfront application fee before they begin processing your loan request. These can vary a lot between lenders and typically depend on the amount you’re trying to borrow. For instance, NowFinance charges $495 for a loan of $10,000 which isn’t bad as far as application fees go.
In addition to one-time charges like the application fee, you may also have recurring ones. Certain lenders charge a monthly service fee. This is usually around $10 to $15. Hence, make sure you factor this into your loan repayment budget as well.
Tips for Comparing Personal Loans
Now that you know what factors to consider, here are some tips to help you with your hunt:
- Get as many quotes as you can – The only way to find out if you’re getting a competitive offer is to compare. Hence, try and get at least three different quotations from lenders before making a decision. The more quotations you get, the better. Make sure you request quotes from different types of lenders as well and not just banks. This will ensure that you get the best rates possible.
- Avoid Hard Credit Inquiries – Hard inquiries or ‘hard pulls’ involve more stringent checks into your credit. Every time a lender requests a hard inquiry your credit score tends to drop a few points. However, this drop is only temporary and may even normalize before the inquiry is finished. The danger lies in having multiple hard inquiries within a span of a few months. This makes you look a little desperate to lenders, giving the impression that you may be in financial trouble and is setting yourself up for a lot of debt.
It’s best to avoid hard inquiries altogether but sometimes it can be difficult. Hence, if you’re not in too much of a hurry, try to at least spread them out. You can also try using online comparison tools instead of requesting from the lenders themselves.
- Consider the overall Cost when Comparing – Just because you’re quoted a lower interest rate doesn’t mean it’s necessarily cheaper. Let’s say you’re looking at two offers with 10.56% and 8.50% fixed rates. If the second offer is a year longer on its repayment loan, then it might actually be more expensive. The same could be true if it charged a monthly fee while the other didn’t. Hence, always consider the overall cost of a loan.
- Go through the Fine Print – The fine print is where lenders detail things like extra fees and penalties like the early repayment charge. If you’re looking at a variable rate loan, the fine print will contain information on how often the rate is adjusted. The more frequent the adjustments, the higher the risk that you’ll pay more.
Personal loans can be quite useful during financial emergencies when you don’t have collateral to offer. However, just because they’re easier to get doesn’t mean you shouldn’t shop around first. Comparing loans will help ensure that you get the best offer possible.