How do Personal Loans work in Australia?

A personal loan is a type of loan that is not secured by any asset. This means that the lender (i.e. the bank), does not have any collateral to take if you default on the loan. Personal loans are typically used to finance major expenses, such as a car, home improvement, vacations or medical bills.

Here are the steps on how personal loans work in Australia:

1. Apply for a loan: You can apply for a personal loan online, by phone, in person at a bank or via a finance broker. When you apply, you will need to provide information about your income, expenses, and credit history.
2. Get approved: If you are approved for the loan, the lender will give you a loan agreement. This document will outline the terms of the loan, such as the interest rate, repayment period, and fees.
3. Receive the money: Once you sign the loan agreement, the lender will deposit the money into your bank account.
4. Make payments: You will need to make monthly payments to the lender. The amount of your payments will depend on the size of the loan, the interest rate, and the repayment period.
5. Pay off the loan: You can pay off the loan early, but you may have to pay a prepayment penalty.

What are the different types of Personal Loans?

There are a few different types of personal loans available in Australia, including:

Fixed-rate loans: These loans have a fixed interest rate for the entire repayment period. This means that your monthly payments will be the same throughout the loan.

Variable-rate loans: These loans have an interest rate that can change over time. This means that your monthly payments may go up or down.

Line of credit: This is a type of revolving loan that allows you to borrow money up to a certain limit. You only pay interest on the money that you actually borrow.

The type of personal loan for you will depend on your individual circumstances and needs. If you are looking for a predictable monthly payment, a fixed-rate loan may be a good option. If you are looking for flexibility, a line of credit may be a better choice. Talk to our team of personal loan brokers to understand what may work best for you.

Are Personal Loans a bad idea?

Personal loans can be a good option for financing major expenses, but they can also be a bad idea if you are not careful! Here are some of the pros and cons of personal loans to consider:

Pros:

• Personal loans can be used to finance a variety of expenses, such as a car, home improvement, or medical bills.
• Personal loans typically have a fixed interest rate, which means that your monthly payments will be the same throughout the loan.
• Personal loans can be a good option if you have a good credit score and can get a low interest rate.

Cons:

• Personal loans can be expensive. The interest rate on a personal loan can be higher than other types of loans, such as a mortgage or car loan.
• Personal loans can add to your debt burden. If you are not careful, you could end up with too much debt and have trouble making your monthly payments.
• Personal loans can damage your credit score if you default on the loan.

Here are some things to consider before taking out a personal loan:

• Your budget: Make sure that you can afford the monthly payments.
• Your needs: Are you sure that you need a personal loan? There may be other ways to finance your expense, such as saving up.
• The interest rate: Shop around and compare interest rates from different lenders.
• The repayment period: Choose a repayment period that you can afford.
• The fees: Find out about any fees associated with the loan, such as origination fees or late payment fees.

If you are considering a personal loan, it is important to weigh the pros and cons carefully. If you are sure that you need a personal loan and you can afford the monthly payments, then it may be a good option for you. However, if you are not sure or if you are worried about your debt burden, then it is best to avoid a personal loan.

Always talk to a broker before making a decision. We can help you explore your options and find the loan with terms that suit your unique circumstances.

Can Personal Loans really be used for anything?

Yes, Personal Loans can be used for a variety of purposes!

Here are some of the most common uses for personal loans:

• To consolidate debt: If you have multiple credit cards with high interest rates, you can consolidate them into a personal loan with a lower interest rate. This can save you money on interest over time.
• To pay for a major expense: If you need to pay for a major expense, such as a car or home improvement, a personal loan can be a good option. However, make sure that you can afford the monthly payments.
• To cover unexpected expenses: If you have an unexpected expense, such as a medical bill or car repair, a personal loan can help you cover the cost. However, be sure to only use a personal loan for unexpected expenses that you cannot afford to pay for with your own money.

What Personal Loans are not recommended for:

• Paying for everyday expenses
• Buying or funding a new business venture
• Consolidating debt with bad credit

How do Personal Loans affect credit score?

Taking out a personal loan can affect your credit score in a few ways.

1. Opening a new account: When you open a new account, it will be reported to the credit bureaus. This will increase your credit history, which can be a good thing. However, it will also lower your average age of accounts, which can be a negative factor.
2. Hard inquiry: When you apply for a personal loan, the lender will likely do a hard inquiry on your credit report. This can lower your credit score by a few points.
3. Debt-to-income ratio: Your debt-to-income ratio is the percentage of your income that is used to repay debt. Taking out a personal loan will increase your debt, which could lead to a higher debt-to-income ratio. This can be a negative factor for your credit score.
4. Payment history: If you make your personal loan payments on time, it will show lenders that you are a reliable borrower. This can help improve your credit score. However, if you make late payments or default on the loan, it will damage your credit score.

Overall, the impact of a personal loan on your credit score will depend on a number of factors, including your credit history, the amount of the loan, and your payment history. Talk to our team for more information before you decide.

What Personal Loans are easy to get approved for?

There are a few types of personal loans that are typically easier to get approved for, even if you have bad credit. These include:

Secured personal loans: Secured personal loans are loans that are secured by collateral, such as a car or a house. This means that if you default on the loan, the lender can take the collateral. Collateral can make it easier to get approved for a loan, as it reduces the risk to the lender.

Peer-to-peer loans: Peer-to-peer loans are loans that are funded by individuals, rather than banks or other financial institutions. This can make it easier to get approved for a loan, as peer-to-peer lenders may be more willing to lend to borrowers with bad credit.

Microloans: Microloans are small loans, typically of $5,000 or less. They are often offered to small businesses or entrepreneurs, but they can also be used by individuals. Microloans may be easier to get approved for than traditional personal loans, as they are less risky for lenders.

Installment loans: Installment loans are loans that are repaid in equal installments over a set period of time. This can make it easier to budget for the loan, and it can also make it easier to get approved for a loan, as lenders know that you will be able to make the payments.

It is important to note that even if you get approved for a personal loan, the interest rate may be higher if you have bad credit. It is also important to always make sure that you can afford the monthly payments!

Personal Loans vs Credit Cards

Personal loans and credit cards are both types of debt that can be used to finance large purchases or unexpected expenses. However, there are some key differences between the two.

Personal Loans vs Car Loans

A Car Loan is a type of Personal Loan, with its own nuances.

While most personal loans are unsecured loans, car loans are often secured. This means that they are backed by the collateral of the car being purchased. This makes them less risky for lenders, and as a result, car loans typically have lower interest rates than other personal loans.

At Parrington Finance, we have quick approval times of only 48 hours from when papers are signed, to when your car loan is approved. Get in touch to secure your dream car today!

Personal Loans vs Business Loans

Personal loans are typically used for personal expenses, such as consolidating debt, paying for medical bills, or making home improvements. They are unsecured loans, which means that the lender does not have any collateral to take if you default on the loan.

Business loans are typically used for business expenses, such as purchasing inventory, hiring employees, or expanding operations. They can be secured or unsecured, depending on the lender and the borrower’s creditworthiness.

Personal Loans vs Line of Credit

Personal loans and lines of credit are both types of credit that can be used to finance a variety of expenses. However, there are some key differences between the two.

Personal loans are typically lump-sum loans that are repaid over a set period of time. They can be used for any purpose, but they are often used to consolidate debt or finance a major purchase.

Lines of credit are revolving loans that allow you to borrow money up to a certain limit. You only pay interest on the money that you actually borrow. Lines of credit can be used for any purpose, but they are often used for unexpected expenses or to cover cash flow shortfalls.

Can you still get a Personal Loan with bad credit?

Yes, you can still get a personal loan even with bad credit. However, it may be more difficult and you may have to pay a higher interest rate. Always talk to a mortgage broker before making any decisions. 

When applying for a personal loan with bad credit, it is important to be prepared. Here are some things you can do to improve your chances of approval:

• Get your credit report and dispute any errors. Make sure that your credit report is accurate and up-to-date. If there are any errors, dispute them with the credit bureaus.
• Increase your income. If you can increase your income, it will help to improve your debt-to-income ratio.
• Reduce your debt. If you can pay down some of your debt, it will also help to improve your debt-to-income ratio.
• Get a cosigner. If you have someone with good credit who is willing to cosign your loan, it will reduce the overall risk to the lender.

Can you still get a Personal Loan if you’re on Centrelink?

Yes, it is definitely possible to apply for a personal loan if you’re on Centrelink. 

When applying for a personal loan on Centrelink, be prepared! Here are some things you can do to improve your chances of approval:

• Get your credit report and dispute any errors. Make sure that your credit report is accurate and up-to-date. If there are any errors, dispute them with the credit bureaus.
• Increase your income. If you can increase your income, it will help to improve your debt-to-income ratio.
• Reduce your debt. If you can pay down some of your debt, it will also help to improve your debt-to-income ratio.
• Get a cosigner. If you have someone with good credit who is willing to cosign your loan, it will make you look more creditworthy to lenders.
• If you are approved for a personal loan on Centrelink, be sure to make your payments on time and in full. This will help to improve your credit score over time.

It is also important to note that some lenders may require you to have been receiving Centrelink payments for a certain period of time before they will approve you for a loan.

If you are considering getting a personal loan on Centrelink, it is important to speak to a finance broker like Parrington Finance to get advice on the most suitable loan for your needs.

Why do I need a Personal Loan broker?

A personal loan broker, like Parrington Finance,  is a person or company that acts as an intermediary between borrowers and lenders. They can help you find the most suitable personal loan for your needs, and they can also negotiate on your behalf to get you the right interest rate and terms.

Here are some of the benefits of using a personal loans broker:

• They can help you find the most suitable loan for your needs: Brokers have access to a wider range of lenders than you do, and they can help you compare different loans and find the one that meets your needs.
• They can negotiate on your behalf: Brokers have experience negotiating with lenders, and they can use their expertise to get you the right interest rate and terms for you.
• They can save you time and hassle: Brokers can take care of all the paperwork and legwork involved in getting a personal loan, so you can focus on other things.

Ready to use a personal loan broker to secure the funding you need? Reach out today.