The rise of personal loans
Personal loans are becoming an increasingly used loan due to the competitive rates that are available on the market and the flexible repayment structures that come with it. However, its selling point is probably the fact that the loan can be used for a wide range of things.
There has been a significant increase in the number of Australians that took out a personal loan to cover their expenses. According to the Australian Bureau of Statistics, personal loans rose by 3.8% in August. Furthermore, data revealed that 19% Millennials are taking out more personal loans.
Top three reasons for a personal loan
When it boils down to it, most Australians take out a personal loan to cover the purchasing of a car, followed by debt consolidation, and holidays. We put studied ABS data which revealed that households fork out a total of $5,859 million on personal loans. Despite this being a 0.3% drop when compared to the $5, 879 million in August of this year, it still forms part of many households’ budgets.
Cars form can be expensive, but for it can be considered a small price to pay for Aussies that are looking for the convenience of being able to drive around. About 1,324 million Australians were estimated to have taken out a personal loan to cover their car expense in 2016 alone.
Debt consolidation is a big feature when it comes to seeking financial freedom with Aussies borrowing $6.05 billion to consolidate their debt. As much as it can be handy to use a personal loan to handle such expenses, there are still some consumers that are being caught out by not checking the loans fees and features.
71% of Australians don’t know what their credit score is
Your credit score plays a vital role when it comes to finding a personal loan that is suitable for your financial situation. However, a recent survey by RateCity revealed that 71% of Australians didn’t know what their score was. Furthermore, 46% were not aware that their score affects their loan interest rate. Therefore, it is vital that consumers carefully consider the loans features, interest fees, ongoing fees and charges to see if it is suitable for them. Failing to do so can land them in more financial trouble than before.
Although personal loans offer the flexibility and the ability to find a competitive rate that works for your finances, keep in mind to always assess your reason for taking the loan out. It can help you make an informed decision on whether a personal loan is suitable or not for your current situation.