Secured Personal Loans Australia
Secured loans are backed by collateral, which means you give permission for the lender to take a particular asset as payment should you default on your repayments. Home loans and car loans are examples of secured loans – if you can’t pay your monthly fee, your home or car can be seized. Interest rates are typically lower, as it’s considered to be less risky for lenders.
If you apply for an unsecured loan using your car as collateral, the application could take a little longer to process. You’ll need to provide specific details, including the value of the car. Most applications will also require that the car be less than 5 years old – the value of the car needs to be at least equal to that of the loan.
Unsecured Personal Loans Australia
This is the most common type of loan taken by individuals. The unsecured loan is not backed by collateral, which is why lenders may charge heightened yearly percentage rates, as this type of loan is riskier for the lenders.
Loan approval and interest rate are mainly based on your repayment capacity and credit scores. The rates range from 5% to 36%, with repayment terms from one to seven years.
Fixed Interest Rate
If you’re worried about rising interest rates on long-term loans, then going for a fixed-rate loan would make sense. Monthly repayments remain the same for the length of the loan, so it would be easier to budget for the duration of your loan as you can count on the figure staying the same.
Variable Interest Rate
Variable-rate loans are linked to the benchmark rate set by the banks. Benchmark rates are also known as reference rates. These are regularly updated interest rates that are publicly accessible. They’re a useful basis for all kinds of financial contracts, such as bank overdrafts, home loans, and more complex financial transactions.
Depending on the fluctuations of the benchmark, the interest rate on your loan, monthly payments, and the total interest cost will rise or fall on a monthly basis.
There is a benefit to variable-loan rates, though, and that is that they usually have lower APRs than the fixed-rate equivalent. Sometimes there may also be a cap on the limits of how much the rate can change over a specific period or over the length of the loan.
Co – Sign Loans
This loan is for individuals who have little or no credit histories, and who wouldn’t necessarily qualify for a loan by themselves. When someone co-signs the loan, the third-party is promising to repay the loan if the borrower defaults. This acts as a form of insurance for lenders.
By adding a co-signer who has an impressive and strong credit track record, your chances of qualifying improve, as well as the chance of getting a lower and more favorable loan term.