With school fees, holidays, and desire for new cars, personal loans are still an attractive and viable option for Australians in need of funds. Whatever project you have, personal loans can make things happen. They’re pretty flexible, offering a financial fix to any issue you have.

According to the Reserve Bank of Australia (RBA), personal loans dropped by $4.8 billion to  $146 billion in 2018. This was the lowest level since 2015. However, they’re still pretty important for millions of consumers. But this may be due to Australian banks imposing stricter limits during the recent property deflation, so you may have to do some loan shopping to actually find the best loan – and acceptance. 

It is indeed prudent before applying for a loan, to understand what you’re getting into. This post will cover what you need to know about personal loans in Australia. Here is a reliable guide on finding the most suitable personal loan in Australia: https://www.mate.com.au/personal-loans/ 

Understanding Personal Loans

Roland Bleyer, the founder and CEO of Mate.com.au says that “The days when the bank manager who knew you for 15 years can offer you the best loan, are pretty much over. Today, we give the consumer online aggregated details that can compare the best deals from various banks in an instant, superseding old relationships. That is exactly why our services have become so popular in Australia, because the rules have changed”. 

Whether you want to buy a car, go on holiday, meet your wedding costs, or pay hospital bills, a personal loan is a go-to option. You can also use it to consolidate your debts into one, making repayments easier.

One of the reasons these loans are great is quick processing times. You can get a response from creditors within one to three business days after applying. This makes them great for those unexpected expenses that come up during those destitute moments.

Keep in mind that personal loans are not intended for financing a property purchase, business activities, stock market investments, court-ordered payments, and unpaid overdue bills and fines. In most cases, creditors will want to know what you intend to do with the money when applying.

How Can I Get a Personal Loan in Australia?

So you want a personal loan? Well, you’ll first determine the type of loan and the amount you want. Then, find and compare lenders, and tools such as Mate can help with that. You want to consider only those lenders with the best interest rates and flexible repayment terms.

Be sure to check your credit score. In Australia, checking your credit score is free, and there are several credit reporting agencies you can use, including Equifax Australia, Dun & Bradstreet, Experian, and Get Credit Score. With Equifax, you only get one credit report a year; you’ll need to pay if you want the report more than once a year.

Don’t forget to read the terms and conditions of the loan you want. Review the interest rates, repayment periods, late payment fees, and the possible consequences of defaulting. Also, make sure you’re eligible for the loans.

Get prepared with everything you’ll need, including proof of identity, proof of income, financial statements, and references if needed. You can then apply for the loan once you’re certain you meet all the requirements.

Types of Personal Loans

There are two primary types of personal loans: secured and unsecured loans.

In secured loans, you place collateral during application. This is basically a valuable asset that your creditor can sell to repay the loan when you fail to pay it in full by the due date. A good example is a car loan, and it usually has different terms compared to other personal loans.

With unsecured loans, the creditor relies on your income to repay your loan. In this case, you don’t really have to place collateral as security. You can agree on the percentage that will be automatically deducted from your account every month. The problem is that you may pay more in interest rates and fees.

A great example of unsecured loans is the personal overdraft facility. This loan gives you a credit limit to use after you have exhausted the full balance of your savings or transaction account. Creditors charge interest on the balance of your overdraft.

There are also other types of personal loans, include line of credit and debt consolidation loans. With a line of credit, you get access to the amount of money you want, but you only pay interest to the amount you’ll use. You can keep your line of credit indefinitely as long as you stick to your lender’s requirements.

Consolidation loans are designed to help you consolidate all your debts. Basically, you use the loan to pay off other debts, and then pay it off like any other personal loan over time.

Eligibility Requirements

Depending on the type of loan you want, lenders will have different terms and conditions you must meet. However, there are general rules that you need to understand before applying for a loan.

Lenders will have a minimum income you need to earn to qualify, for example, $35,000 per year. Some may only need proof of regular income. Proof of income means you can service the amount you want.

Some lenders will also want to see proof of employment. It basically means you have a paying job that can help you meet your loan obligations. Keep in mind that casual and part-time jobs might not be considered, but you still have options designed for such jobs.

A crucial eligibility requirement is your credit history. You’ll generally need a good credit rating  to apply for a loan; anything between 622 and 1200. A good score typically means you’re reliable and trustworthy, so lenders will have no problems with you in paying back the loan together with the interest.

Some lenders accept borrowers with bad credit, but the interest rate is likely to be high.

Some loan applications will request information on your assets, expenses, and debts. Lenders use this information to review your loan application. Assets will improve your chances for approval while debts may lead to possible rejection.

Also, you must be 18 years or older and an Australia citizen or permanent resident.

What are the benefits of personal loans?

There are many reasons personal loans make ideal options compared to other finance options, such as credit cards.

Most offer an easy online application, which you can complete in as little as 10 to 15 minutes. Be sure to have all the needed information before applying. It’s possible to get a response within 24 hours of applying.

The loan is also flexible, as you can choose the amount you want. Some lenders can also allow you to choose how long you want to pay the loan back. Consequently, making it easier for you to have a repayment schedule that suits your budget.

Some lenders can have restrictions on what the money can be used for, but others are flexible. If your lender has no restrictions, you’re free to use the money on whatever you want. Just make sure the use is reasonable.

Final Thoughts

Personal loans are great if you want a fix for unexpected expenses. But before you apply for one, you need to determine your needs and goals. Compare the fees and rates of different lenders before picking one.

To reduce your risk for the loan, you can apply or a secured loan, or ask someone to be your guarantor on the loan. Just make sure the roan and repayments are affordable. Keep in mind that your lender will determine the interest rest based on factors, such as loan amount, loan term and risk.