There are times when you need a personal loan either to purchase a new car, refurbish your home or to fund a holiday. Getting the best credit deal is a problem because you are likely to be confused by the different types of loans being floated in the market. To get the best deal suited to your needs, you need to compare personal loans considering various aspects. Check out the differences between fixed and variable interest, secured and unsecured loans, the terms of the loan and the minimum repayments you need to make.
Many Types Of Products
Before you compare personal loans you must understand that personal loans differ from other types of financial credits like home loans and credit cards. Typically, the term "personal loan" covers many types of products.
* Holiday loans, debt consolidation loans and home loans come under the category of unsecured loans
* Car loans come under fall under the secured loan category
The advent of credit cards has led to fierce competition among financial credit lenders for small and medium purchases. Credit card interest rates have been slashed drastically making it an attractive option for credit card holders. However, credit card means easy money and it can hurt one's finances badly particularly in the case of those who find it difficult controlling their spending habits. On the other hand, personal loans are purchased after a well thought out plan and there is no temptation to spend more than what you can afford.
Factors To Bear In Mind
When you compare personal loans you need to carefully assess the following.
Most loans have a set repayment amount even as the interest rates can be fixed or variable.
Loan periods vary from one year up to seven years. When you compare with home loans, interest rates are much higher though lower than rates for credit cards.
Secured And Unsecured Loans
If a loan is secured, it means the loan is purchased by securing it against an asset you own and usually it refers to the asset purchased with the loan. If you fail to pay the loan, the lender takes possession of the asset. Unsecured loan does not require you to offer anything as security and is given to you by the lender based on the contractual obligations you make to pay it back. When you compare personal loans of secured type and unsecured type you need to note the following.
* With a secured loan you can borrow much more than with an unsecured loan. In addition, a secured loan allows you to spread payments over a longer period of time.
* A secured loan has a lower interest rate than an unsecured loan
* You can get a secured loan even if you have a bad credit history. Unsecured loan lenders have tighter lending criteria because lenders delve into your credit history and level of income.
Comparison Of Interest Rates
Comparison of interest rates can be the most difficult part. When you compare personal loans, you must take into account monthly fees, establishment fees and any other fees charged by the lender. Australian Securities and Investment Commission (ASIC) regulate lending businesses so that consumers are able to compare loans by different lenders. Very often lenders claim better interest rates, when in fact; the other fees they charge may be higher than that of their competitor.
When you compare personal loans, the other parameters you must consider include the establishment fee, other fees, repayment terms, exit fees and redraw fees.
Getting a personal loan, especially a large amount is a major financial transaction in your life. It pays well to do your homework by comparing all aspects of the products available in the market.