How to find the right kind of personal loan
When you need, or want, to borrow money, you’ll have a wide range of financial products to choose from. It’s important to weigh up your options carefully – the right type of personal loan can help you save on interest and other costs.
Medical bills, urgent dental treatment, major car repairs, a new washing machine or fridge – sometimes you’re bound to need money for an unavoidable and unexpected expense.
It’s best to avoid so-called ‘payday loans’. These usually have repayment terms of 16–60 days, and there’s a danger the high fees, high interest rates and high default/late payment fees could trap you in a cycle of debt.
If you have a good credit rating, a credit card could be a better option as long as you have the income – and self-discipline – to pay it off quickly. You could also consider a personal loan you can pay off over a longer term, but be sure to consider a loan that gives you the flexibility to pay it off early if you wish.
All-purpose personal loan – from a holiday to home repairs
A personal loan is a specific amount of money you borrow then repay with interest over a fixed period of time. In general, personal loans have lower interest rates than credit cards and you won’t be tempted to keep on spending as your balance decreases.
Personal loans can be secured or unsecured. The interest rate is usually lower for a secured personal loan but the lender will want security in the form of something you own, such as a car, motorbike or another vehicle. This isn’t the case for an unsecured personal loan, but the interest rate is likely to be higher.
Latitude offers personal loans with a fixed interest rate, where the amount of interest you pay each month stays the same. This way you know exactly what’s coming up and you don’t have to keep track of changing payment amounts.
Car loan – spot a good deal
A car loan is effectively a personal loan you can only use to purchase a vehicle. As most car loans are secured using the vehicle itself, the interest rates are generally lower than, say, an unsecured personal loan.
The most common terms for repayment are 36, 48 or 60 months. As always, the shorter the term of the loan, the higher the repayments but the less interest you should pay. If you’re buying a car from a dealer you may be offered a loan on the spot, but it’s a good idea to check out other lenders first to make sure you’re getting the best deal.
Consolidation loan – all your debts in one convenient account
When you have a number of personal loans or credit card debts, rolling them into one could help you save money. A consolidation loan with a lower rate of interest could reduce your monthly repayments and help you save hundreds of dollars in interest over time.
With a consolidation loan, you’ll have just one repayment and one statement to keep track of each month. However, you need to check all the costs and interest rates to make sure a consolidation loan is worthwhile.