Factors to Consider When Looking for Cheap Personal Loans

Choosing loans to borrow can be difficult, and finding a cheap one can even be challenging. This is because various lenders are available in Australia, and they differ from each other. For example, some lenders have high-interest rates, and others offer unsecured and small quick personal loans.

Therefore, we’ve made a short list of all the factors you need to consider when looking for a cheap loan. So, keep reading our article to learn how to find cheap loans.

What this article covers:

• What Are Personal Loans?
• How to Get a Personal Loan: Factors to Consider

What Are Personal Loans?

Before looking for a cheap personal loan, it’s crucial to understand what personal loans are. 

Personal loans represent a specific amount of money you can borrow from a bank, lender, or similar financing institution. But you have to repay that money via regular payment rates.

The purpose of a personal loan is for almost anything you need. You can use it for educational purposes, setting up a workspace, making changes to your property, or you can even use a personal loan to consolidate debt.

How to Get a Personal Loan: Factors to Consider 

Deciding how much money you need and comparing the cost of different personal loans is the most simple and effective way to find loans. And by doing so, you’ll be able to choose a loan you can surely pay back.

However, multiple factors can affect the cost of your personal loan. So, before applying for one, here’s what you should check:

• Loan amount
• Interest rate – fixed or variable
• Loan term – short or long
• Loan type – secured or unsecured
• Fees

Loan Amount

Naturally, depending on how much money you need to borrow, the cost of your repayment rates will differ. And it’s crucial to note that most lenders won’t lend a loan below a specific amount of money. For example, most lenders in Australia offer personal loans only above $2,000. 

Always consider borrowing only the amount of loan that’ll suffice your planned expense. This way, you won’t end up paying more than you actually need.

Interest Rate

Undoubtedly, the interest rate is the most common factor that could impact the price of your loan, and it represents a percentage of the money the lender would charge you for borrowing.

For instance, your lender would set an interest rate when you apply for a loan, and you’d have to pay that percentage with every repayment rate. Also, you should note that an interest rate can be fixed or variable.

Fixed

A fixed interest rate is the one your lender sets at the beginning, and it stays like that until you repay the entire loan. This rate is a more secure option, which works well if you have a small budget and want to pay consistent rates in small amounts. Opt for this rate when looking for low cost loans.

Variable

Your lender could modify the interest rate over the term of your loan repayment, depending on their current profitable conditions, making it a variable interest rate.

For example, if they’d increase the interest rate, your repayment rates would be noticeably higher than at the beginning, and your loan would cost you more than you expected.

Loan Term

The loan term represents the time you have available to repay your loan. The repayment of a personal loan can last between one and seven years. 

It mainly depends on interest rates and the amount of loan you’re borrowing. But try to choose a short-term loan to decrease its overall costs (less time, less interest paid, thus, a cheaper loan). 

Note that even if you opt for a long-term loan, it’s possible to make early payments and repay the loan faster. However, note that some loans come with extra fees for early repayments, which they’ll charge to ensure they don’t lose interest rates.

Loan Type

The type of personal loan is another factor that can affect the total cost of your loan. Here are the two types of personal loans:

Unsecured

An unsecured personal loan can be an option if you don’t possess a valuable asset, such as property or a vehicle. This personal loan is riskier for the lender, as they’ll lend you money, and you won’t deposit your asset as a guarantee of repayment.

Due to its risk, this type of loan comes with noticeably higher interest rates, which are most likely variable. Also, there’s a high chance you’d have to settle for the less flexible payment rates and additional fees.

Secured

Of course, a secured private loan is the exact opposite of an unsecured one. In this situation, you’d have to deposit your asset and guarantee you’d repay the entire loan on time. But the positive side is that you’d be eligible for much lower interest rates, more flexible repayment methods, and cheaper loans overall.

Fees

A decent way to avoid hidden expenses is to compare the potential fees. Although there might be some lenders who don’t have any fees, you should always check before applying since most of them charge fees, especially if you want to find a personal loan fast.

When looking for loans, check for the following fees:

• Application fee
• Annual fee
• Administration fee
• Service fee
• Late payment fee
• Early payment fee

Conclusion

Considering that various bank loans in Australia can have high-interest rates, finding cheap loans may seem difficult.

However, if you’re borrowing the right amount of money and comparing all the potential factors, you’ll find the right personal loan.