4 tips on how to avoid making poor borrowing choices

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on November 25th, 2021       

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A personal loan can help you bring you one step closer to your dream holiday, taking a course in whatever interests you, consolidating debt and paying off for your special day. However, don’t let a few bad borrowing choices leave you with a bad credit rating. Let a personal loan become something of a convenience rather than a nuisance by keeping these four essential tips when it comes to avoiding making poor borrowing choices.

Scope the competition on interest rates

It all ties in with knowing what you want from your loan, you might have a set goal in your head, but you also need to know what is available to you on the market. Choosing a loan type along with the interest rate can mean the difference of you paying interest of 14.99% or 5% a year. It all depends on how you enjoy the sound of saving.

When it comes to your finances take your time on deciding. Try avoiding making a decision when you are pressed or financially stressed. If that is the case speak to a financial advisor who will help you look at your financial situation with a sober mind, and will help advise you on which path to take. We couldn’t stress how essential it is that you always compare interest rates when shopping for a personal loan. Never settle for the first offer that comes your way.

Be aware of hidden fees

Now that you have compared and found a good personal loan with an amazing interest rate, you will have to consider the fees that come with it. It’s advisable not to accept loans at face value as some have a honeymoon period that start of with almost 0% interest on them for a period.

However, once this time is up you will be slapped with hefty interest rates that can choke you financially. As a consumer you will have to learn to use your vocal chords and ask. Check to see if the features of the loan are suitable for you and your current financial situation.

Will you be able to meet payments for the whole period of the loan? What are the hidden fees that come with the loan? Ask until you are fully satisfied that all your queries have been met.

There’s much more to it than comparing costs

Paying attention to the overall cost of your personal loan is essential, but that’s not the be all and end all of what you should consider. Other factors you will have to consider is the customer service and the overall experience that your lender offers you, or else you could be stuck in a nightmare.

Check to see if the lender you are opting to go with is a reputable lender that is registered in the state in which they operate their business. Scammers have gotten smarter, and knowing how to catch their sneaky tricks is important.

The last thing you want is someone making a quick buck at your expense. See what other customers are saying about the Personal loan provider you are thinking of going with to avoid frustrations in the long run.

The right way of consolidating debt with a personal loan

Using a personal loan to consolidate debt is not uncommon in Australia. When you are considering consolidating your credit card debt you will have to change your spending habits. Failing to do so will be like you going to the gym, but binge eating on junk food straight after a workout. It will get you nowhere. You will have to adjust your spending habits by cutting out unnecessary purchases that you put on your credit card.

In the end, be honest with yourself. Ask yourself if you really need a personal loan and are you willing to be committed to it for the set period. There will be some spending habits you will have to adjust, but overall it will be worth the investment.

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