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How to Get the Best Personal Loan

published  First Published: 20/01/2010
Article written by: Darryl Houston
Follow the following steps to ensure you are doing the best thing financially for yourself.
 
Step 1 - Why take out a personal loan?
 
PERSONAL loans for big ticket items, and amounts are making a comeback after being overtaken by credit cards, which are more flexible - but best suited to short term borrowing for small purchases.
 
Repaying a personal loan by fixed instalments over a medium to long period has always been a niche field.
 
Personal loan interest rates are traditionally lower than credit cards and can be taken out for any number of reasons - paying for an upcoming holiday, buying a new car or furniture, medical procedures, or even to cover education fees.
 
The loan has to be for a specific purchase that costs between $5000 to 50,000.
 
Step 2 - Who do they suit?
 
They suit borrowers who lack security such as young people who rent, and people who want fixed repayments over one to five years for the certainty, to quarantine their debt or to aid budgeting.
 
Because personal loans have lower interest rates than standard credit cards they can be used in a strategy to consolidate several debts.
 
Applying for your first personal loan is a rite of passage to getting a credit rating: banks and credit unions use them to attract new customers they set up a deposit account into which goes salary and out comes loan repayments.
 
Step 3 - Getting the best deal
 
Using an asset such as car or caravan as security will attract a lower interest rate (6.8-14 per cent for a car loan). Same if you are saving up for a home loan deposit, your term deposits will count.
 
Credit unions have taken over personal loans as their specialty. They are everywhere and fiercely competitive with the banks and non-bank lenders. Check out on-line comparisons of lenders rates, such as from Loans-Australia which compare interest rates from different lenders.
 
Lenders will negotiate the lowest rate with good customers (especially if you have a mortgage) but sometimes you have to ask. If you do have a home loan, consider adding the personal loan to a line of credit loan, making sure it does not become a honey pot for overspending.
 
Step 4 - Get the best fit
 
Tailor the loan to your needs if you are going to be able to make extra repayments, go for a variable rate loan allow to pay off a loan quicker, reducing the interest paid.
 
Fixed interest rates give repayment certainty over longer periods (especially if interest rates look like rising) and are often cheaper.
 
Step 5 - Take a Look Online
 
There are a huge number of sites online that allow you to compare different loan lenders and types of loans available.
 
One of these is www.loans-australia.com.au which also enables you to apply for a personal loan online even with a Bad Credit History.

 

Related Article: Why Savings is Important for Personal Loans

 

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