February 27, 2023 by Anna Ruffo
When you need money fast, a personal loan could be a good solution. A personal loan is a type of loan that provides access to smaller sums – anything from a couple of thousand dollars up to around $62,000* depending on the lender.
Just like a home loan, a personal loan can come with a fixed or variable interest rate, and you can usually choose to make repayments weekly, fortnightly or monthly, whichever matches your payday.
As a bonus, you can pick the term of a personal loan to suit your budget, though the loan will usually need to be repaid within 1-7 years.
Often, we want to book that trip but our bank account says no, or you had some unexpected medical expenses, or perhaps you have been thinking for a while to renovate your bathroom or update some of your furniture. Or simply you want to tick off some of the items on your bucket list or you are sick of postponing your wedding day and it’s time to say yes, this is when a personal loan can come really handy!
Personal loans have a lot of benefits but at the same time, there are some things to consider. Let’s see below some of the pros and cons of personal loans.
PROS
- Quick turnaround: Personal loans are a fast solution when you need money straight away. Personal loans generally have fast approval times, with some lenders the funds can be in your bank account as soon as the next business day, making them really convenient when you have an emergency, like when your car suddenly breaks down!
- Debt consolidation: if you want to consolidate high-interest rate debts or merge all the individual loans and credit card balances into one. This will reduce the number of payments you have monthly and, at the same time, you could reduce your overall interest rate. Your credit score could improve after consolidating the other debts and reduce the risk of forgetting to make a repayment.
- Competitive rates: Standard unsecured rates range from 7.64%-12.99%** - with the majority of clients falling into the 8.99%-10.99% range.
- No collateral requirements: Most unsecured personal loans don’t require collateral for you to get approved, which means you won’t have the risk of losing valuable assets if you default on the loan.
CONS
- High-interest charges: Not everyone is eligible for low-interest rates on personal loans, it depends on the loan offer, your credit history and your income.
- Fees and penalties - In addition to interest rates, some lenders may charge application fees and opening fees to cover the cost of processing. Other lenders instead may charge prepayment penalties if you pay the balance off before the end of your loan term or if you are making late payments. This is why is so important to check the fine print about fees and penalties.
- Possible Credit Damage: If you fail to make a payment or default on the loan, your credit score will be affected as while lenders report positive payment history to credit bureaus, they also report late payments and nonpayment.
Like any loan, the lender will want to see you can comfortably manage the repayments. So you’ll need proof of income and employment plus details of any other debts you have. Our brokers can help with the paperwork, which makes the application process easy.
*per person - we do have the capacity to complete one personal loan for each member of a household i.e. $50k for wife, $50k for husband - Unsecured Personal loans can reach up to $80k, depending on income, asset backing, and stability.
** Unsecured PL rates can extend beyond 25% for clients with lower credit scores, or non-standard credit conduct.
