Taking a personal loan is a tried and trusted way to access money to purchase an item important to you, or to help you overcome short-term cash issues.
There’s an almost endless list of reasons why you may need a personal loan. Some of the most common motivations include buying a car, meeting medical expenses, funding a holiday or paying for a wedding.
The reason for the loan doesn’t always matter when it comes to a personal loan. The most critical factor for any lender is that you are able to meet the payments over the prescribed period.
Your ability to show you have a stable income and a track record of repaying debt will serve you well. A lender will want access to your financial information, and most will restrict loans to citizens, residents and non-residents with long-term visas and employment.
Here are some tips to consider before applying for a personal loan.
- What is the purpose of the loan? – Lenders will offer loans with different terms and conditions, depending on your purpose. For example, you can seek an unsecured personal loan, which is used for travel, weddings and other personal desires.
- Flexi loans – These are lines of credit that allow you to draw down money as you need it. You pay interest only on the funds you take, whereas with a personal loan you pay for the entire sum whether you use it or not.
- Car loans – These often have a lower interest rate than a personal loan because you’re buying an item that can be used as security.
- Rates and fees – Work with a broker to understand the rates and fees that apply to each loan you might consider. Some lenders will apply charges for early repayments and an early exit from a loan. Others might ask for insurance, or apply establishment and service fees.
- Term of the loan – Payments will be lower if you take a longer-term loan. However, you’ll pay more in interest in the long run. You’ll need to determine the right balance for your financial situation.
- Payment plan – You can minimise your interest fees by paying weekly or fortnightly. However, some loans insist on monthly payments only. Again, seek the advice of your broker to find the most cost-efficient solution for you.
This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.