Whether you want to buy a new car, upgrade your kitchen or even start an investment portfolio, a personal loan may help you achieve your goals.
As with all loans, it's important to shop around for the best deal and understand what's considered in your personal loan application. Also, it's a good idea to ask the right questions - here are five essential ones to take to the lenders you approach.
1. How much can I borrow?
The amount you can borrow varies from lender to lender, and will depend on a range of factors including your income, liabilities, living expenses, your credit score and how you plan to use the loan. You can also use a calculator to get an estimate of how much you might be able to borrow.
Consider also whether a personal loan is the best option for your needs. Seek a professional advice if you're unsure about whether a personal loan is right for the goal you're trying to achieve.
2. How long can I take to repay my loan?
Your loan term is determined by what you agree with your lender. The longer your loan term, the smaller your repayments, but you’ll also have to pay more overall interest to borrow the same amount.
When deciding on an ideal loan term, determine your comfortable repayment amount and consider any other debts you will have to service alongside a new personal loan and then work backwards.
3. How is interest charged on my personal loan?
The interest rate for your personal loan will vary from lender to lender, and is affected by factors such as the cash rate set by the Reserve Bank of Australia, the cost of funds (which determines the prevailing market interest rate), your loan type (whether it’s a fixed or variable rate structure) and the term of your loan.
By understanding how and when interest is charged, and how it will accumulate on your loan, you may be able to find ways to minimise the amount of interest you pay in the long run.
4. How often can I make repayments on my personal loan?
Lenders will sometimes offer you a choice to make your repayments in weekly, fortnightly or monthly instalments.
Consider whether you’re after a fixed-rate loan structure, in which you’re obligated to meet the required regular repayments. Additional payments on fixed-rate loan usually incur an early repayment fee and/or a break fee. Note that the fee may vary from lender to lender.
5. How much will I pay for my personal loan in total?
As you assess your financial goals and how you’ll achieve them, it’s helpful to know exactly how much it will cost you overall for your personal loan. While the cost will include the principal and interest, some financial providers may also include a range of charges like establishment fees, account-keeping fees and even fees to terminate your loan early. With Pepper Money there are no establishment or monthly repayment fees.
These articles provide you with factual information only, and are not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. The information in these articles is believed to be reliable at the time of distribution, but Pepper does not warrant its completeness or accuracy. Neither Pepper nor its related bodies, nor their directors, employees or agents accept any responsibility for loss or liability which may arise from accessing or reliance on any of the information contained in these articles. For information about whether a Pepper loan may be suitable for you, call Pepper on 13 73 77.