If you are one of them and need money in a hurry, you may want to consider a personal loan. 

This article will look at some of the different types, what factors you should consider, and how to compare the other options before making a final decision.

Different types of personal loans

Let’s dive in and explore the different types of personal loans available.

●     Secured personal loans

A secured personal loan is the most common type, where you borrow money against something you own. If you default on your repayments, the lender is entitled to seize your security item instead of payment. 

A secured personal loan gives you better rates and fees because you are considered less risky.

●     Unsecured personal loans

Unsecured personal loans require no collateral but commonly come with higher fees and interest rates than secured loans because of the risk factor involved.  

If you default on repayments, the lender can institute legal proceedings, so you still risk losing if you don’t honour the agreement.  

On the upside, unsecured loans often prove easier to get and are still a cheaper option than most credit cards when it comes to interest rates.

●     Debt consolidation loans

This loan enables you to combine your numerous debts into one single loan. It allows you to pay off your debts in a single place, making your life easier and costing less interest. 

There are possible drawbacks, such as turning your short-term debt into a longer-term loan, which can eliminate the advantage of a lower interest rate.

●     Student loans

If you're eligible, the Australian Government pays for some of your studies and gives you a loan to pay for the rest. You'll repay your HECS-HELP loan through the tax system when you're working full-time and earning over a certain amount.

Fixed and variable interest rates

●     Fixed-rate loans - A fixed-rate loan means that your interest rate is locked for the duration of your loan, and these loans tend to have higher fees and rates but offer secure repayments.

●     Variable-rate loans - A variable loan means that the interest rate is likely to change according to the broader market. These tend to have lower fees and rates but are subject to change if the interest rate on your loan is increased, which would ensure higher repayments in turn.

Depending on what the loan is for, either one of these options can work. Consider using fixed loans for more significant purchases to take advantage of the more structured repayments.  

Variable loans are possibly a better option for a smaller loan amount, such as paying off the holiday you’ve just taken.

As you can see, several options are available to help you financially. Before signing the dotted line, you can discuss all the options available with your prospective lender.

If you want to learn about personal loans, don’t waste any time before contacting Credit24, an Australian market-leading provider of personal finance.  

Sources

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IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839. The information in this article is of general nature and does not take into consideration your objectives, financial situation or needs. Lending criteria, fees and charges apply. For more information about our products, eligibility criteria and terms and conditions, please visit www.credit24.com.au.