Best Personal Loans

When finding the best personal loan for you, it’s important to approach the process with a clear understanding of your needs. Applying blindly or without knowing how a personal loan truly works could leave you short on the funds you require or with a greater loan debt than you needed to take out. Consider the following steps to help you pick out your ideal personal loan.

Work out how much you need to borrow and what you can afford

Before all else, you should determine why you need your personal loan and the amount required to cover whatever costs need covering. You may wish to take out a loan to consolidate a range of outstanding debts, renovate your home or simply help you pay for your next family holiday.

The second step here is to crunch the numbers and work out what you can actually afford to take on as a borrower. This calculation can include factors such as your income, expenses, employment, credit score and more in coming up with an approximate number you should be able to comfortably support. You can use Savvy’s borrowing power calculator to give you an estimate of what lenders might be able to approve you for if you were to apply.

With this in mind, you’ll be able to enter the comparison process with more clarity on which lenders are suitable for you based on their potential borrowing ranges. For instance, if you were looking to take out a smaller loan of just $2,000, you’d be able to immediately rule out the lenders who set their minimum amounts at $5,000 or more. The same applies to borrowers who wish to borrow more than $50,000, as only some lenders allow applicants to access that much money.

Decide what type of personal loan you want

There are several types of personal loan, so you should always have a clear understanding of the differences between them. Knowing how they differ from one another will help you decide which is the most suitable for you. The main types to consider are:

• Unsecured personal loans are the most basic and common type of personal finance. You can simply apply for a loan without the need to supply any assets or collateral and generally borrow up to as much as $75,000. Because of the lack of security, these loans are typically faster to be approved and financed, although they tend to come with higher interest rates and fees.
• Secured personal loans do come with the requirement for an asset to be attached to the loan as collateral, meaning this will be acquired and sold to recoup funds in the event you become unable to pay off the loan. This is very much a last resort, though. These loans are characterised by cheaper rates and fees and expanded borrowing ranges up to $100,000, although the time taken to process them may be greater.
• Personal lines of credit differ from standard loans in that you’re approved to withdraw funds up to a set limit whenever you like, rather than receiving and managing a lump sum. You’ll only be required to pay interest on the balance used, albeit often at a higher rate than usual and with other fees for maintaining the account. They also don’t tend to come on set terms, meaning they can be kept open on a revolving basis as long as they’re viable.

Think about the type of interest rate you’d like

There are two types of interest rate which can apply to personal loans: fixed and variable rates.

Fixed interest is the most common on personal loans, locking your rate in from the start and protecting you from any rises in your lender’s rate across your term. They also allow for more accurate and stable budgeting around your instalments.

On the other hand, variable rates can change from month to month in line with the RBA cash rate and how your lender decides to respond to it. While they can allow for savings if rates fall, you may end up paying more and not have the ability to budget as well.

Consider different types of lenders

While it’s most important to invest time and effort comparing specific deals, you might also have a preference as to the lender you decide to go with for your loan. Some of the key differences between different types of lenders are as follows:

1. Banks: the biggest lenders on the market. Banks can provide a wide range of services across all sorts of product areas and some of the bigger ones have advanced, robust customer support systems. However, they can often be the most expensive in terms of personal loan rates and fees, which is one of the most important factors to consider.

2. Credit unions and building societies: customer-owned or mutual financial institutions often serve as a cheaper alternative to banks, as they come without any need to pass profits onto shareholders (given that they don’t have any). While you still may have branch access, it’s likely to be less than that of a bank and services are also more limited.

3. Online lenders: the newest entrants into the marketplace, online non-bank financiers have set out to make a difference and offer the most affordable deals to Australians. Because they exist wholly online, there’s never any need for you to visit any branches (which is a negative if you prefer physical locations) with advanced online infrastructures to rival banks in some cases and often come with less stringent lending criteria compared to the banks.

Compare loans with Savvy

Of course, perhaps the most effective way to boost your chances of finding the best loan for your needs is by comparing with Savvy. We’re partnered with reputable lenders from around the country to help you conduct high-quality comparisons and learn at a glance what each financier can offer you as a customer. It’s never ideal to dive into the application process blindly and not know which lender is the perfect option for you, as doing so could potentially save you hundreds of dollars, if not more.