Best personal loan guide – what to consider when shopping around for a personal loan. If you’re looking for personal finance, it is imperative you understand how to compare lenders. Moreover, finding the best loan for your situation may save you money and get the most out of your credit. Not sure how to compare lenders? No stress, Monzi is here to explain it all.
What is the best personal loan to get?
This answer is, unfortunately, almost impossible to answer as there are so many variables at play. After all, the best personal loan for one consumer may not be the best for another. As a general rule, however, a personal loan should:
- meet your financial objectives; and
- be reasonably affordable.
Keep in mind, that the best personal loans are not simply defined by the lowest interest rate. There is a number of other loan features to take into consideration.
In addition, while the best loan may be seen as the cheapest one, lower rate loans are usually reserved for consumers with good credit scores. As a result, certain parts of the consumer market may be barred from these loans.
Fixed or variable interest rate
You may have the option of either a fixed or variable interest rate. Whichever option you choose will have a major impact on how your loan is structured.
Obviously, a fixed interest rate does not change over the term of your loan. No matter what, you’ll know exactly what your repayments will be each month. This consistency may help you better plan your budget.
On the other hand, a variable interest rate is subject to change. Put simply, your repayments will become more expensive if the interest rate rises. If the interest rate drops, so too will your repayments.
Variable rate loans, however, usually have no early exit fees. This may be an attractive feature if you plan to repay your loan as early as possible.
Monzi is unable to tell you which loan rate is best for you.
Secured or unsecured personal loans
Also consider whether you’re wishing to apply for a secured or unsecured loan. Both come with their risks and benefits. We’ll explore both your options.
Unsecured personal loans are not backed by one of the borrower’s assets, hence the name. Moreover, unsecured loans pose a bigger risk to lenders than loans backed by security. Unsecured loans, as a result, are often only available on smaller loan amounts.
If you fail to repay your unsecured loan, the lender may pass your debt onto a debt collector. While they have no asset to repossess, debt collectors can still make their presence felt.
Debt collectors are legally allowed contact you via:
- Phone. Debt collectors can call you any time between 7:30 am to 9 pm Monday to Friday, and between 9 am and 9 pm over the weekend.
- Digitally. Debt collectors may get in contact over email or social media if they are reasonably sure you do not share your account with anybody.
- Face-to-face. The last resort for debt collectors if you haven’t returned their calls or other attempts at communicating. Specifically, lenders can attempt to meet you any day between 9 am and 9 pm.
Secured personal loans
Secured loans are guaranteed by one of the borrower’s assets, like a car or motorcycle. Moreover, this security reduces the level of risk posed to the lender. After all, they can repossess the vehicle you used as security and recover their losses if you fail on your loan.
While repossession, understandably, sounds unnerving, be aware that Australian Consumer Law protects you in the event of a repossession.
For example, the lender cannot begin the repossession process if your debt is less than:
- $10,000; or
- 25% of your loan (whichever is lower).
Additionally, your car cannot be repossessed if it is on your property. Moreover, lenders can only step foot on your property if they have a court order.
Finally, your lender will send you a written notice within 14 days of repossession that outlines:
- estimated value of the vehicle
- cost of repossession, as well as any ongoing costs
- a statement of your rights under the law.
Then, for 21 days after sending you that notice, the lender cannot sell your car, giving you a chance to get it back if:
- you pay the overdue amount (plus costs); or
- the full amount owing.
Definition of best personal loan in Australia
There are so many factors to consider when comparing personal loans. Moreover, consumers may vary in what emphasis they put on these factors.
We’ll explore a few loan features you may want to consider when you’re looking for the best loan for your situation:
- Amount. Is the amount you’re thinking of applying for available from this lender?
- Terms. Does the lender give you enough time to pay your loan off in full? Shorter repayment terms result in higher repayment terms but less paid in overall interest. On the other hand, longer terms may result in lower regular repayments but more interest paid over the life of your loan.
- Extra repayments. Can you make extra repayments without incurring a charge?
Which bank is best for personal loans?
Again, we cannot answer this question for you. While a certain bank may be able to offer a great personal loan to one consumer, they may not be able to offer the same to others.
If you aren’t sure what your options are, consider employing the services of a broker. Brokers gain an understanding of your situation and make suggestions accordingly.
Moreover, your broker may be able to tell you which bank is best for your circumstances.
Can Monzi find me the best personal loan in Australia?
No, we may not be able to match you with a lender offering the best personal loan in Australia. Because, after all, what do we even mean by best?
If you are looking for the lowest interest rate on your loan, Monzi may not be your best option. After all, we work with lenders that are more open to risk than traditional credit providers. Furthermore, interest and fees may be higher in order to compensate for this risk.
If you, however, have poor credit, Monzi may be an option worth considering. As mentioned earlier, we work with lenders who are willing to potentially offer loans bad credit.
A comparison rate, put simply, is a number that helps you figure out the true cost of your loan. Moreover, it reduces the interest rate plus most of the fees and charges into a single figure.
As a result, the comparison is often a truer reflection of the total cost of your loan.
Bear in mind, however, that these rates may not factor in all the potential fees and charges. For example, it may not include dishonour fees for missing payments.
Best personal loan repayment terms
Another thing to consider is the repayment terms. Specifically, your repayment term is a set period of time in which you are expected to pay off your loan. Depending on a number of factors, your repayment terms may range anywhere from several weeks to many months. Both long and short repayment terms come with their own benefits and drawbacks.
For example, a short repayment term may result in high regular repayments. However, because personal loans are interest-based, you will pay less interest over the life of your loan. This may be an ideal option for consumers looking to get their loan settled as quickly as possible.
On the other hand, the reverse is true for longer repayment terms. While your regular repayments will be lower, you will pay more interest overall.
In addition, depending on the lender, you may be able to choose between weekly, fortnightly and monthly repayment schedules. If you get paid fortnightly, it may make sense to line your direct debit date up with your pay cycle.
Who do I talk to about personal loans?
As mentioned earlier, it may be worth employing the services of a personal loan broker. Brokers can quickly make recommendations based on your situation, needs and objectives.
Alternatively, you can access financial advice. For more information on financial advisers, head to ASIC’s MoneySmart website.
Monzi Personal Loans
Monzi is a lender-finder service that aims to pair you with a potential lender. While we cannot guarantee you being offered the best loan for your situation, we can guarantee that our service is simple, convenient and easy to use.
Moreover, consider Monzi if you find yourself looking for any of the following.
|Small loan||$300 to $2,000||Up to 12 months||✗|
|Medium loan||$2,100 to $4,600||13 to 24 months||✓|
|Large loan||$5,000 to $10,000||13 to 24 months||✓|