Navigate your personal loan options with our guide on how to find, compare, apply for and manage all types of personal loans.
A personal loan can help you fund a variety of purposes including purchasing a car, consolidating debt or even undertaking home renovations. The important thing when applying for a personal loan is to find one that suits your needs and budget. This guide will take you through what you need to know.
First, choose the situation that best describes what you want to do:
Comparing unsecured personal loans
An unsecured personal loan is a loan that doesn't require an asset, such as a car, to be attached to the loan as security. You can use the funds for any purpose such as consolidating debt, a wedding, a holiday or even buying a used car.
Tips for comparing unsecured personal loans:
- Check the comparison rate as well as the interest rate. The comparison rate includes the fees as well as the interest rate. Common fees include establishment or application fees and monthly fees.
- Find out if you can repay the loan early without penalty or make additional repayments and check if there is a redraw facility.
- Generally, apply for as short a loan term as you can afford. You can also apply for a longer loan term to keep your repayments low, but make sure you're able to repay the loan early without penalty.
- Loan amounts from $5,000
- Offers a reusable credit facility
- Repay over 5 years
100% confidential application
Citi Personal Loan Plus
Apply for a Citi Personal Loan Plus and get competitive interest rate offer with a reusable credit facility.
- Interest rate from: 9.99% p.a.
- Comparison rate: 10.95% p.a.
- Interest rate type: Variable
- Application fee: $199
- Minimum loan amount: $5,000
- Maximum loan amount: $75,000
Comparing car loans and secured personal loans
A secured personal loan and car loan are similar in that they both require an asset to be attached to the loan as a guarantee. However, with a car loan, you are required to use the funds from the loan to purchase a vehicle. With a secured personal loan you need to already own the asset and you can then use the funds for any purpose.
These loans come with competitive rates because they are secured. Here is what to keep in mind when you're comparing your options:
- Are there restrictions on the vehicle you can purchase with the funds (in the case of the car loan) or that you can use as security (in the case of the secured personal loan)? For example, does the vehicle have to be under a certain age or over a certain value?
- With the car loan, are there restrictions on how you use the loan funds? For example, are you able to borrow above the vehicle's value to cover on-road costs such as insurance?
- How flexible are your repayments? Find out if you can select your repayment frequency and if you can make extra repayments or repay the loan early without penalty.
Compare personal loans for debt consolidation
Debt consolidation loans work by letting you bring debts from different credit accounts together so you can pay them off with one rate and one set of fees.
When you're comparing loans for debt consolidation:
- Consider whether the new loan will save you money. Work out your new monthly repayment and if this will be lower than what you are currently paying.
- Think about your eligibility for the loan. If you have a lot of debt from several accounts you may not be able to consolidate all of it, or if you have bad credit you may need to consider your bad credit debt consolidation options.
Compare short-term personal loans
These are small, short-term loans that are used to cover expenses that come up before payday. Loan terms are for between 16 days and one year and you can usually borrow up to $2,000, although sometimes up to $5,000 is available.
Here's what to know when comparing short term loans:
- Fees on short-term loans under $2,000 are capped. You won't pay more than a 20% establishment fee and a 4% monthly fees
- Loan terms are typically about three months but can extend up to 2 years
- Some lenders offer additional features, such as free debit cards and easy repeat borrowing
- Check the eligibility criteria before applying
How do I know which type of personal loan I need?
Different type of personal loans suit different loan purposes. Here is how to find the right loan to suit your needs:
- If you're looking to buy a car: You can consider either a car loan or an unsecured personal loan. A car loan is preferable if the car you're looking to purchase is eligible to be used as security (not all used cars are) as the interest rates are lower. However, if you're buying a used car that is older, don't want to use the car as security for the loan or want to borrow extra funds for something else as well, you may want to consider an unsecured personal loan. You can compare both on the page above.
- If you want to consolidate debt: You can consider an unsecured personal loan or a balance transfer credit card. The right option for you will depend on the type of debt you want to consolidate, how much debt you have and what products you are eligible for. For example, if you have personal loan and credit card debt you may need to consider an unsecured personal loan or a Citi or Virgin balance transfer credit card. That's because they are the only two providers that let you balance transfer personal loan debt. You can compare unsecured loans for debt consolidation on the page above or head here to compare balance transfer cards.
- If you want to pay for a wedding, take a holiday or pay for home renovations. You may want to consider an unsecured personal loan. These can come as either a lump sum payment or a convenient line of credit that you can draw on when you need to.
- If you need to borrow less than $3,000. You won't have many options from banks for loans of this amount, so you may need to consider a personal overdraft, a line of credit or a credit card. You can also consider a short term loan (there is a comparison on the page above) but keep in mind these are very high-cost forms of credit and should only be taken out if you have no alternatives.
- If you have an asset, such as a vehicle, to offer as security. You can consider a secured personal loan. This involves you attaching an asset you already own to take advantage of a more competitive interest rate. You can then use the funds for any purpose.
How can I compare personal loans?
As you can see from the personal loan types outlined above, you have a few forms of financing available. Not only that, but you have various brands offering a number of different loans. So how do you compare them? Asking the following questions will help you narrow down your options, compare what's available and find your loan.
- What do I need the loan for? The purpose of the loan will have a bearing on the type of loan you should apply for. If you want to buy a vehicle, a secured car loan will get you the most competitive rate. However, you need to check if the vehicle you're buying is eligible for a secured car loan. If you need access to ongoing emergency funds, a line of credit or personal overdraft are options to consider. Decide what you want to get out of the loan and then make sure the loan will be able to accommodate your loan purpose.
- Do I want fixed repayments or flexibility with how I pay? Fixed and variable interest rates both come with benefits and drawbacks. A fixed interest rate means you know what your repayments will be for the duration of the loan term, but you won't be able to make additional repayments or repay your loan early without penalty. You will get that flexibility with a variable rate loan but your interest rate may fluctuate throughout your term.
- Does the loan give me what I need? Does the loan allow you to borrow the amount you need? How quickly will you get your loan funded, and will it be in the timeframe you require? How do you repay your loan – is the amount debited out of your account, or do you have to manage the repayments yourself? Can you manage the account online?
- Am I eligible for the loan? Check the minimum eligibility criteria before you apply for any loan – this is always listed on finder.com.au review pages so you can conveniently check off what's required before clicking "Go to Site". Minimum age, income, employment and credit history requirements are likely to apply. If you have questions regarding any of the criteria, it's best you get in touch with the lender before submitting your application.
What you need to know about managing your personal loan
Personal loans can give you a way to get you want now without having to save for it, but without a budget or idea of how you're going to manage your repayments, you can easily fall into late payments or even defaults. What many people underestimate is how difficult it will be to repay a loan. Here are a few helpful tips to help you manage your personal loan.
- Draw up a budget that includes your repayments. Depending on the size of your loan, you could see a couple of hundred dollars a month coming out of your account, and if you have a variable rate loan the repayments will not be the same each month. Having money to fall back on in your budget will make it easier to get by each month.
- Use a personal loan repayment calculator before you apply. This will give you an idea of what the loan is going to cost and if you will be able to afford the repayments.
- Look at the comparison rate. This will give you an idea of the true cost of the loan as it includes fees as well as the interest rate.
- Check the flexibility of the loan before you apply. Are you able to make additional repayments? Is there a redraw facility? These features may help you to save money down the line.
Frequently asked questions about comparing personal loans