Best Personal Loan Interest Rates
Personal loans can come in extremely handy when you need money to buy a new car, make home improvements or pay for one of life’s big events such as weddings or holidays. Personal loans give you the means to pay upfront for many types of items, offering you the convenient option of being able to repay the money over a set period of time. Personal loans can also be useful if you have several small debts – since by consolidating them into one package you can often reduce the interest rate.
It’s essential however that you understand the different personal loan types available in Australia, so you can find the best personal loan interest rate to fit your circumstances and budget.
Unsecured personal loans
Unsecured personal loans offer you a way to borrow without putting you at risk of losing any kind of collateral, for example your property, should you default on the loan. This is a straightforward way to borrow money, however the downside is that unsecured loans tend to be more expensive since lenders have to take on more risk. Unsecured loans are usually available for smaller amounts, have relatively high interest rates and are repayable over a fairly restricted period of time.
Secured personal loans
Secured loans are often used to make big purchases, including cars and more expensive items. If you fall back on payments, lenders have the right to repossess your purchases as collateral to make up the defaults – and this can include from the equity on your home. Secured loans allow you to borrow high amounts of money over a longer period of time, often of up to 25 years. You might consider a secured personal loan to pay for an addition to your property e.g. an extension or conservatory, with the plan being that the added value to the property might pay for the loan in the long term.
Fixed and variable rate personal loans
Before deciding on the best personal loan to suit you, you need to work out the price of the loan including interest and fees, and whether you can afford the repayments – even if your circumstances change. There’s a wide variety of lenders all offering different personal loan interest rates, fees and conditions. Basically though there are two types of interest rates, fixed and variable, both of which have their advantages and disadvantages.
Fixed rate loans often work out cheaper initially, especially if you think interest rates are likely to rise.
Variable rate loans are dependent on the fluctuations in interest set by the Reserve Bank of Australia. You can benefit greatly in times when interest rates are low, but need to be wary of rates rising.
If you’re unsure how much you want to borrow, as well as the level of repayments you would be expected to pay, consider using a loan calculator.
Always read the small print
Take the time to read all the terms and conditions applicable to your personal loan, especially with regard to what happens should your financial situation change for the worse. When you’re buying for a specific purpose – personal loans are a good option. If you want to borrow a small amount of money for under a year, you might be better off using a low rate credit card.