Australia’s lenders (both traditional and online banks, digital money loan operators and credit unions) are all offering low interest rate loans to suit the current market.
But before you jump in to access funds to renovate your home, buy your dream car, take your next holiday or consolidate your debt, take a good look around and compare what’s on offer.
The money market is energized right now and it pays to know the ins and outs, pros and cons of different finance platforms and personal loans on offer.
What can I use a personal loan for?
You name it, you can use it, although not for gambling or playing on the stock market. You can, however, get behind the wheel of a new car or boat, open the door to a new room in your home, the door of a new fridge, expand your business, consolidate your debts and more.
The results from our recent Plenti survey, revealing the top seven reasons for taking out a personal loan.
- Debt consolidation 25%
- Home improvement 22%
- Buying a car 18%
- Renewable energy 13%
- Travel plans 5%
- Medical expenses 2%
- Wedding expenses 2%
Other people use personal loans for distinctive reasons, such as to finance further studies or car repairs, or even for an investment.
Your lender will want to know the purpose of the loan when you apply. They’ll likely take this into account when tailoring the loan size and conditions.
What personal loans can I access in Australia?
The most popular personal loan is an unsecured personal loan: they’re flexible across a wide range of purposes, and if you have proof of a regular income and a decent credit history then this could easily be the personal loan for you. They’re easy to apply for, and often have a fast turnaround so you could be living your dreams sooner than you think.
If you’d like to lock in a lower interest rate or perhaps your credit rating isn’t so grand, then a secured personal loan may be your better option. You simply secure your loan with an existing asset you use as collateral. The bank considers these loans less of a risk so they offer a lower interest. There is a longer application process, relating to the asset you’re offering as security, but in the end you may be able to borrow larger amounts and have a longer repayment term.
When it looks like life is about to throw a few financial curveballs, small personal loans have you covered. If you need a short term finance solution to keep everything under control, then a small personal loan may be your best option. You borrow less and pay it back in a shorter time frame. Yes, your interest rates may be higher, but you’ll have that new fridge, car fixed, home reno or wedding guest list sorted in no time.
Self-employed, freelance or casual seasonal worker? A low-doc loan may be what you’re looking for. All the funds without the lengthy loan application process. Lenders consider low-doc loans to have more risk than a secured or unsecured personal loan, so they’ll offer higher interest rates to offset that risk. But the plus for you - less documentation is required. You won’t need to provide as many pay slips and tax returns as standard personal loans. This means the process to apply is far simpler and less time consuming than a standard personal loan.
Already have a loan? Want to get a better one and save, or consolidate your current debts? Then you need a refinancing personal loan. These are designed to take over your current loan or loans, so you can save on interest rates and fees - and time paying multiple repayments. They’re even a good option if your credit score has improved as you’ll be able to get a better rate.
Who is taking out personal loans in Australia?
A recent survey by Finder reveals that one in five Australians have or will have a personal loan in the next six months. That’s nearly 4.5 million of us funding all sorts of projects and purchases this way. While cars, home renovations and debt consolidation are reasonably common purposes, Australians are known to borrow for weddings, racing bicycles, dream holidays, elective surgeries, further education and even tropical fish tanks! Let’s take a closer look at what types of loans we’re taking on.
Australians love a holiday. We spent 417.9 million spent on domestic travel in 2019 - averaging $193 per person per night according to Budget Direct. And given we’re also the 12th most expensive country to fly away from it’s unsurprising we borrow for our travels.
Can you put a price on true love? Maybe. Australians spend on average around $36,000 on their weddings. Spending that much can be daunting when you’re just starting out as a couple. So it makes sense that 60% of couples took out a loan to help spread the expense over a number of years.
Annually, around 750,000 Australians proceed with some kind of elective surgery - and most won’t be prepared financially for it. A medical loan can be really helpful in smoothing the costs out over time.
One quarter of adults said they would find it difficult paying a $200 dental bill. It’s not surprising that many Australians delay or avoid a dental procedure. A dental loan can be really helpful in smoothing these expenses out over time.
Around 20% of Australian households owning an investment property. From Stamp Duty to conveyancing and legal fees, building and pest inspections - it can all add up. An investment loan helps if you’re coming up a little short, or trying to avoid expensive mortgage insurance.
As of February 2020, there were 2.7 million Aussies with a student loan. These loans can be a great way to take the next step in your career sooner, without extensive financial strain.
Aussies love motorbikes - approximately 79,623 motorcycles and Off Highway Vehicles were sold in Australia last year. And another popular reason we take out a personal loan.
Jet ski loans
Jet skis were the fastest-growing boat segment in 2019, with more than 76,000 registered in Australia. Investing in these ultimate water-toys can cost between $6,000 to $25,000 and finance is a popular way to get out on the water sooner.
Now more than ever, boating is hugely popular, with over 2 million of us holding a boat licence, 915,000 Aussies owning a boat, growing by around 10,000 every year. And often funded by a personal loan.
Where do I find a personal loan lender?
Traditional banks, credit unions, neobanks and online loan providers all offer personal loans. Some have better rates than others, with less fees and charges.
The important thing is to compare the loans available to discover which one suits you best. Then once you know what kind of personal loan you want you can then compare all of those styles of personal loan on offer.
Compare, compare, compare
Research takes time but it’s made easier with comparison websites and rate calculators. Plus, it pays to spend this research time as it can save you a ton of money in the long run.
You can compare loans with the Plenti comparison calculator including comparison rates, interest rates, application fee, exit charges and loan term. The comparison rate is the one to watch as it will show one figure that encompasses the entire cost of the loan you are researching.
How do I apply for a Personal Loan?
Once you’ve decided which style of loan suits you, then you can reach out to the appropriate money lender. Though do be aware that multiple applications can hurt your credit score.
If you reach out to Plenti for a personal loan rate suited to your circumstances, then that’s considered a soft credit check and won’t impact your credit rating. However once you apply then your credit rating will be under consideration.
Most banks and money lenders today will offer digital applications so you can apply online, but if you prefer a traditional bank then you can visit a branch near you to start your application.
What do I need to apply?
Depending on the type of personal loan, you’ll need a certain amount of documentation.
Proof of income with pay slips and employment contracts, letters from your accountant, proof of home ownership or years in business, your ABN if self-employed and other documents. If you are applying for a secured loan then you’ll need proof of your assets and their value.
You’ll definitely need proof of identity for all personal loans, so make sure you have your drivers licence, passport, proof of residency et al.
What’s the easiest and quickest way to secure a personal loan?
Convenience is king, right? When it comes to personal loan applications and approvals, online is the most convenient.
However, do be aware that the easiest and fastest way may not always be the best way to save money. A low-doc loan is quick and convenient but comes with higher interest, a secured loan has lower interest rates but will take longer to process.
What loan rates can I expect?
Plenti will take your personal history and credit rating into account to create a rate specific just for you.