Do You Need a Personal Loan?

How Personal Loans Help You

There are many different types of loans that are available from home loans, car loans, and business loans just to name a few. However, the personal loan is one that many Australians use for a number of different reasons. Personal loans are very common and offer those who qualify a wide range of uses so they can deal with projects or issues that are outside of standard loans.

What are Personal Loans?

This type of loan is general one that is lower in terms of amounts compared to an auto, business, or home loan. It is generally one that is unsecured which means that nothing is attached which can be used as collateral. The loan itself is designed to address a particular need that cannot be met by a designated loan.

The personal loan can vary in size from just a few hundred dollars for payday loans up to several thousand or more depending on the needs. This type of loan is generally unsecured and will need to be paid back according to a pre-set schedule.

How May a Personal Loan Be Used?

The good news is that you can use them for a variety of means. The lender mostly cares about getting their money back with interest. So, if you have a new addition to make to your home, a particular piece of equipment you want to purchase, or if you just need the money to cover other debts while paying a lower interest rate, then a personal loan may be right for you.

Payday: This is a quick-pay type loan which is generally limited to a few hundred dollars or just a little more. It is designed to help people address issues that require a fast payment such as an unexpected car repair or utility bill. This particular type of loan generally comes from a lender that specializes is quick cash or payday loans. Be advised that they are only meant to address a situation that requires quick cash and often have higher than normal interest rates.

Personal: This is a loan that generally consists of a thousand or more dollars and is designed to meet a host of needs. Because it is an unsecured loan, your credit rating or score will be the main source used for approval unless you have sufficient collateral available. Generally speaking, these loans are designed to be paid back in a year up to three or more years and can be used for a number of purposes.

Advantages of Personal Loans

There are a number of benefits when applying for this type of loan, particularly if you want to get the right type of flexibility and rates for your efforts.

Quick Approval:

Lower Rates: If you get a personal loan that has a lower interest rate, you can use it to pay off your credit cards and other debts and combine all payments into one. This can save you hundreds of dollars and even more if you structure the loan correctly.

Flexible Spending: Because the loan is mostly based on your credit or collateral, you have a wide range of options to use the money that is received. The only stipulation that is really important to the lender is that they get their money back. So, you can use it to add on to your home, go on vacation, or just have cash on hand for expenses that need to be taken care of quickly.

Customizable: Another advantage of this type of loan is that you can customize it for your particular needs. This means that you can get the lowest amount possible and thus pay back less to the lender. Or, you can add a little more just in case an unexpected expense should arise so you will be covered.

Disadvantages

Of course, this type of loan may not be right for some depending on the needs. First, it makes better financial sense to save or raise the money needed for projects that only cost a few thousand rather than taking out a loan. While this takes more time, it costs considerably less money over the long run.

Interest Rates: Although the interest rates will depend in part on your credit score, they are generally higher than home, auto, or business loan rates. Therefore, if you are planning on using a loan to purchase a home, vehicle, or startup your next business you will probably be paying higher rates with a personal loan.

Unexpected Expenses: While you can customize the loan to fit your particular needs, quite often people over-rely on the personal loan to cover everything. Take for example going on vacation. While most people will cover the flight and hotel expense, food and paying for local travel can eat up a great deal of the budget.

Why Choose a Personal Loan?

There are a number of reasons why this type of loan can work best for you, but the bottom line is that you can expand your spending to cover a number of different situations. You can think of this kind of loan as one to use when you simply do not have the cash on hand. The good news is that if you have the right credit rating you may get more than you expect which adds a little peace of mind.

You will want to shop around for the right interest rates before making a final decision on which lender to choose. Plus, you’ll want to see if there are other options available that make more sense for your situation. For example, if you are thinking of adding on to your home or purchasing a new vehicle, you might benefit from loans that are better tailored for such needs or grants that might offer substantial assistance without having to take out a loan.

A personal loan is one that you should carefully consider when addressing a particular need. Be sure to look at other options first before making your final decision. However, if you have the credit score and need the money to fulfil a particular project, then this may be the best course of action.