Learn more about personal loans, before you borrow.

1. Determine your purpose

The first step is to be crystal clear about why you need a personal loan. Are you looking to cover an unexpected expense, fund a home improvement project, or consolidate high-interest debts? Understanding your purpose will guide you to the right loan type and amount.

2. Loan amount and term

Once you've defined your purpose, calculate how much you need to borrow. Avoid overborrowing, as it can lead to unnecessary interest costs. Also, think about the loan term, which is how long you want to take to repay the loan. Shorter terms usually mean higher monthly payments but less interest paid overall.

3. Interest rates

Research and compare interest rates from different lenders. In Australia, personal loan interest rates can be fixed or variable. Fixed rates offer predictability, while variable rates may change over time. Find the rate that suits your budget and financial goals.
4. Credit history

Lenders in Australia consider your credit history when evaluating loan applications. A good credit score can help you secure a loan with better terms. Check your credit report, address any issues, and work on improving your score if needed.

5. Fees and charges

Understand the fees associated with the loan, such as application fees, ongoing fees, and early repayment penalties. Look for loans with minimal fees to reduce the cost of borrowing.

6. Secured versus unsecured loans

You'll come across both secured and unsecured personal loans. Secured loans are backed by collateral, which can be an asset like your car or savings. Unsecured loans don't require collateral but may have higher interest rates.
7. Comparison shopping

Don't rush into the first loan offer you see. Shop around and compare loans from different lenders. There are various options, including banks, credit unions, and online lenders. A finance broker can help you find the best loan option for your situation.

8. Eligibility criteria

Review the eligibility criteria of different lenders. Some may require a minimum income, specific employment status, or other conditions. Choose a lender whose criteria align with your financial situation. A finance broker can help you navigate this.

9. Repayment capacity

Evaluate your ability to make regular loan repayments. Ensure the loan amount and term fit comfortably within your budget. Missing payments can negatively impact your credit score and lead to financial stress.

10. Professional guidance

If you're new to personal loans, consider seeking advice from a finance broker. They can provide insights and help you choose the right loan based on your unique needs.