Whether you need to fund some time away, renovate your home or return to university, a personal loan could be just what you’re looking for
The personal loan market is flooded with lenders spruiking the best rates and product features. As a result, finding a loan that meets the requirements of your purchase can be a confusing process.
However, glamour-driven advertising aside, there are five options to consider when shopping for your personal loan.
1. A secured loan is typically a low-interest loan used for larger purchases such as a new car. A lender will use your intended purchase or asset as collateral. If you default on the loan, the bank will repossess your asset to cover the outstanding debt.
2. An unsecured loan is ideal for borrowers dreaming of a holiday, planning to renovate the family home or simply gain greater control of their finances through debt consolidation. The borrower does not need to provide any collateral, but first-time borrowers may be required to supply a guarantor depending on the total value of the loan. These loans are considered higher risk by lenders and as a result, tend to have a higher interest rate.
3. A variable rate personal loan has a fluctuating interest rate that will go up or down as determined by the lender. It lacks the certainty of a fixed rate product where the borrower can lock in an interest rate for a specified period. Variable rate loans tend to have a lower interest rate and are suitable for nearly all transactions.
4. Fixed rate personal loans allow borrowers to lock in an interest rate over part or all of the life of the loan. The advantage is clear: lock in a low rate and rest assured your repayments will remain the same. The downside is that while interest rates may fall below your product’s fixed rate, your repayments will still remain the same.
5. Line of credit personal loans allow you to access funds as and when you need them. The benefit of this type of loan is that you’ll only be required to pay interest on the money you use rather than the total value of the loan. This type of loan also offers increased flexibility for borrowers in need of additional funds since they can draw on the available balance.
These are the five most common personal loan products; there is, however, still a raft of other loan features to consider.
We can help you weigh up your options as well as provide access to hundreds of personal loan products and information, ensuring you get the best, most suitable product available
Give us a call today – and make those dreams come to life!