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Learn more about personal loans

Learn more about personal loans

If you wouldn’t buy a car without comparing makes and models, you probably shouldn’t be getting a personal loan without doing thorough research. Whether you're looking to fund some home improvements, or you need a debt consolidation loan, it's important to weigh up your options.

Find out what you need to know before starting your personal loan search.

Why should I search for personal loans?

Searching for personal loans can be a time-consuming chore. With so many personal loan options on the market from different lenders across Australia, it’s normal to feel overwhelmed by the information.

While you might be tempted to leap for the most convenient credit product, or sign up for a personal loan recommended by a friend or family member, this may not be a great idea. The reason is everyone’s personal borrowing needs and financial situation can be vastly different. For example, you may have a good credit score but your friend may have a different credit history, meaning you may qualify for a lower rate. Or perhaps your friend may have a home loan, giving them another liability to factor in.

Different types of personal loans may also have different eligibility criteria. Just because your friend secured a personal loan from one lender, doesn’t mean you automatically pass that same lender’s lending criteria.

Investing time to search for a personal loan could also save you money in the long run. By shopping around before making a loan application, you’re more likely to find a personal loan with the fees, features and interest rate that you’re happy with.

Like with other financial products, it’s important not to skip this search and shop around so you can make sure you’re choosing the best personal loan suited to your own circumstances. After all, getting a personal loan is all about satisfying what you need.

What should I look for when searching for a personal loan?

Many people often start their personal loan search simply by looking for the lowest personal loan interest rate. The interest rate is the percentage extra you’ll need to pay your lender with each loan repayment, and is effectively one of the biggest determining factors of the cost of the loan.

But the best personal loan for you may not be the cheapest, as there are other loans features that you may find useful. It's always wise to research your options before you make your loan application (or refinancing application) by comparing different types of personal loans to find the best one for you.

Aside from a low rate, some personal loan features you may want to look at include:

  • Fixed or variable interest rates – Having a fixed rate loan means the interest rate you’re on and your loan repayments won’t change. A fixed interest rate gives you certainty about your monthly repayments, and you won’t be in for any surprises. If you’re on a variable rate loan, your loan repayments and interest rate could move up or down.
  • Secured or unsecured personal loan - A secured personal loan means the loan is secured by an asset, such as a car. A personal loan is unsecured if a borrower doesn't put down collateral to secure the loan. Lenders will typically charge higher interest rates for unsecured personal loans because they deem them as riskier than secured loans. Unsecured car loans are generally considered personal loans.
  • A longer or shorter loan term – Generally, personal loan terms are between one and seven years. The longer the term, the lower your regular repayments may be, but the more overall interest you may be paying.
  • The ability to make extra repayments - Some personal loans will allow you to make extra repayments additional to your regular repayments. Having the option to make additional repayments on your personal loan could mean saving money on interest and paying your loan off faster. Not every personal loan offers this feature.
  • No early exit fees – As the name suggests, a personal loan which doesn’t charge early repayment fees means you can pay off your loan before the scheduled loan term ends without forking out potentially hundreds of dollars for it.
  • Redraw facility - A redraw facility allows you to redraw any additional payments you’ve made, which can be useful if you need cash for any reason in the future. You may be charged redraw fees for this.
  • Other fees - Upfront and ongoing fees can considerably add to the cost of the loan. An example of an upfront fee is an application fee, while ongoing fees may include monthly account keeping fees.

How do I search for personal loans?

Some people know the importance of searching for a personal loan, but may not be sure where to start.

A good place to kick off your personal loan search is a comparison site such as RateCity, where you can easily compare the interest rates, fees, features of prospective personal loans side-by-side.

A side-by-side comparison can help make it clear to you which personal loan is your best option.

To search for the personal loan most suitable for you, think about what your own financial needs are and, from there, narrow down which features are most useful or attractive to you.

You can then scan through comparison tables and use personal loan repayment calculators to do more research.

Comparison tables

A comparison table lays out the key details of multiple personal loans in a table format. It allows you to clearly compare apples with apples. To use comparison tables effectively, enter the main details of what you want from a personal loan (for example, how much you want to borrow) and filter down the results according to loan type, interest rate type and other details. The table will then show you the options that fit your bill, along with the key details of each.

By comparing the interest rates, comparison rates, fees and features side-by-side, comparison tables make it easier for you to find a personal loan that's well-suited to your financial circumstances. Using comparison tables may also help you find a lower interest rate.

Personal loan calculators

When you have narrowed down your search to a few personal loan options, you may want to use a personal calculator to work out what your potential repayments could be. To use, enter how much you want to borrow in the calculator. As the calculator won’t affect your credit score, you can try keying in different loan amounts and different terms to compare results. Enter the interest rate you have in mind and select between weekly, fortnightly and monthly repayments. You’ll also need to choose a loan term, before your calculation comes up. Keep in mind that any calculations are estimates only and may not include fees and other charges. For specific details on this, it could be worth going through a personal loan's product disclosure statement.

How do I use RateCity's Real Time Ratings™?

Done enough research but want to know if your findings stack up with what the professionals think? It could be worth heading over to RateCity’s Real Time Ratings™ to add a credibility boost to your search and comparison results. Real Time Ratings™ is a world-first rating system that ranks personal loans, tailored to your personal borrowing requirements.

While other personal loan rating systems generally rate products less than a few times year, Real Time Ratings™ are assessed daily. Each personal loan is rated with five stars being the highest score, based on cost of the loan, flexibility. The assessment also factors in your personal loan amount, loan term, borrowing purpose and whether you’re putting down any security.

Why does my personal loan search show a different best personal loan from someone else’s?

You may have noticed that someone else has selected a personal loan that’s ideal for them, but looks different from what you’ve chosen. This is because the best personal loan for you doesn’t necessarily suit everyone else.

The best personal loan for you is one that meets all your needs and suits your loan purpose, while factoring in price, features and benefits. This is why it’s so important to shop around and make personal loan comparisons, rather than signing up for a personal loan with your existing bank or the first one that appears on Google. Comparison sites like RateCity allow you to compare personal loans by a combination of interest rates, fees and features. This can help you do your research more effectively and a lot faster, so can get started on that home renovation or consolidate your debts sooner!