Personal Loans are probably the most basic of financial products. Consumers borrow a specific amount of money they need then repay the debt with interest in equal payments over an agreed term. Personal Loans offer the general advantage of being cheaper than the closer alternative (credit cards) and providing the discipline of a repayment schedule.

What can I use a Personal Loan for?

You can use a Personal Loan for any worthwhile purpose. This can be anything from buying a new or used car, paying for holiday, education fees, unexpected bill payments, home renovations or even a wedding. The most common use for a Personal Loan is Debt Consolidation. If you have any other need, feel free to talk to us about it.

How can a Personal Loan help with other debts?

Through Debt Consolidation you are able to roll all your current debts or loan repayments into the one Personal Loan. This will make it much easier to manage your finances, with one simple often lower repayment  to make either weekly, fortnightly or monthly, the choice is yours, instead of multiple repayments which often are to keep track of. IMPORTANT: The key is to remember to pay as much as possible each month off the balance of your loan as this will help you in paying your loan off sooner plus any extra funds paid into the loan can easily be redraw if needed (fees and charges may apply).  Debt Consolidation structured correctly is a very effective way to control your debts and often increase your borrowing capacity when planning to purchase a residential property.

Types of Personal Loan?

A personal loan can either be Secured or Unsecured.

A loan can be secured by a bill of sale (i.e. car) or lien over an asset like a term deposit. Secured loans are usually cheaper than unsecured loan because the lender has the right to claim the asset used as security in the event that you default on the loan.

Unsecured Loans on the hand are collateral free and are therefore more expensive. Since the lender has no security in the event of a default the loan is usually perceived to be more risky.

Personal Loans can be either Fixed or Variable:

Advantages of a Fixed Rate: Having a fixed rate loan guarantees that your repayments will stay the same for the fixed period. This means that your loan is insulated from interest rate movements by the Reserve Bank. Having stable repayments means you can better prepare a more reliable personal budget for the long term.

Disadvantages of a Fixed Rate: One of the draw backs is that you might have restrictions of how much extra repayments you can make also if you wish to pay off the loan early you might have to pay an early repayment penalty.

Advantages of a Variable Rate: Variable rates move with the Reserve Bank Interest Rate. If the Reserve Bank lowers interest rates, you can expect the required repayments of your variable rate loan to decrease as well. Variable rate loans are more flexible allowing you to make extra repayments at anytime which in hence will also shorten the life of  your loan.

Disadvantages of a Variable Rate: Variable rates move with the Reserve Bank Interest Rate. If the Reserve Bank increases interest rates, you can expect the required repayments of your variable rate loan to also increase. For some borrowers not having repayments that are set for an extended period can make it difficult for them to budget their repayments.