The best tips and pitfalls for personal loans
Personal loans are likely to become more and more popular in the coming months as Australians look to consolidate debt, finance long-planned real estate projects, or simply raise extra cash in these economically difficult times.
A low rate personal loan from a trusted bank or non-bank lender is a much better option than going for a payday loan or a quick loan, and personal loan rates are now more affordable than never, but there are a lot of things that can go wrong in taking a loan and paying it back.
So, if you are considering a personal loan, read on for Mozo’s expert guide to the best personal loan tips and pitfalls and check out our comparison of low rate personal loans from bank and non-bank lenders in Australia.
Personal loan expert advice:
Look beyond the big banks to find the most competitive rates. Small online lenders have some of the lowest rates in the market, with rates starting at less than 10% for borrowers with good credit.
Save on interest with additional no-charge refunds. Every extra penny you invest in paying off your loan will reduce the interest you pay. Just watch out for the fees, as some lenders will charge you additional repayments.
Pay off persistent debt with a debt consolidation loan. If you have multiple credit cards or small loans and get lost in paperwork and late repayment penalties, consider combining small debts into one lower rate debt consolidation loan.
Avoid these personal loan pitfalls:
Avoid payday loans and quick cash loans. Payday loans can be quick and easy to arrange, but in Australia the legal interest rate limit for these loans is 48% per annum, plus a high upfront fee.
Choose the right fixed loan term from the start to avoid breakage fees. Make sure you don’t lose the prepayment savings by carefully choosing the length of your loan and finding a loan that will allow for additional repayments.
Check your consolidated loan schedule. You may have gotten a lower interest rate to lower your repayments, but if the loan term is much longer than the individual debts, you could end up paying more interest over the life of the loan.
^ See information on the Mozo Experts Choice Personal Loan Awards
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