6 things to consider before taking out a personal loan

Are you dreaming of a new car? Or perhaps you need a little extra money for your fairy-tale wedding or you are planning to start a family? A personal loan could be the exact financial solution you need to meet your desires.

Taking out a personal loan can be a big decision to make, so we have comprised a list of 6 things to consider before applying – to make sure you are getting closer towards your dream.

 

• Do I meet the requirements to qualify for a personal loan?
• What is the personal loan for?
• What are the interest rates?
• What are the fees associated with a personal loan?
• What is the term of the loan?
• How do you plan to pay it off?

1. Do I meet the requirements to qualify for a personal loan?

The first thing to consider is whether or not you meet the minimum requirements to qualify for a personal loan. The basic requirements are:

• You are 18 years or older
• You have a regular income
• You are a permanent resident of Australia or you hold an acceptable (PDF 489KB) non-resident visa
• Accessible details of your current financial situation

A helpful indicator of your current financial position is to enter your details into the Borrowing Power calculator before proceeding with the personal loan application process. Your application will be subject to lending criteria once submitted.

2. What is the personal loan for?

The next step is to think about what you want to use the loan for. There are lots of different types of loans in the market so it’s important to choose a loan that suits your situation and what you intend to use it for. Here at Westpac, we offer 3 different types of personal loans.

Unsecured Personal Loan

An Unsecured Personal Loan is a loan that is offered without any security to an asset, like a car or house. This type of loan is often used for travel, weddings or debt consolidation and while it does have a slightly higher interest rate than a secured loan, it allows you the freedom to borrow money without collateral.

Car Loan

A car loan is a great way to purchase a new or second-hand car without having to spend a long time building up your savings. Car loans often have a lower interest rate than an unsecured personal loan because the car is used as security, providing the vehicle is under 7 years of age.

Flexi Loan

A Westpac Flexi Loan acts like a line of credit, allowing you to withdraw funds as you need them. This is different to a traditional personal loan as you only pay interest on the funds you have withdrawn, rather than the whole lump sum. This style of loan is great for situations where you may be required to pay for things at different times, such as a home renovation, a new baby or a wedding. The best part about this type of loan is that you can dip into the pool of funds as often as you need, with no additional fees for withdrawals. Flexi Loan applications can only be made in a branch or by calling 1300 720 697.

Have a look at our personal loan comparison to help you choose the right loan for your needs.

3. What are the interest rates?

An interest rate is an amount that the bank or financial institution changes on top of the money loaned.

Ideally, you want to choose a personal loan that can offer you the lowest possible interest rate so you can focus on paying off the money you borrowed rather than extra interest. The type of loan will determine the interest rate. Typically, if a loan is secured with an asset the rate will be lower than a loan which is unsecured.

View our current personal loan interest rates to see how we compare against the rest of the market.

4. What are the fees associated with a personal loan?

Every loan will have a different range of fees associated with it. Fees to look out for include:

• Lending establishment fee
• Servicing fee
• Early exit
• Early repayment
• Insurance
• Withdrawal fees

Make sure you take the time to consider these fees when deciding on the type and term of your loan to avoid any unnecessary expenses.

5. What is the term of the loan?

The length of your loan will determine your repayment amounts and the amount of interest you end up paying over the life of the loan. The longer the length of the loan, the lower your monthly repayments will be. Most personal loans can range from 1 to 7 years.

6. How do you plan to pay it off?

This seems like an obvious point but it’s important to plan out how you intend to repay the debt. Will you be paying weekly, fortnightly or monthly? Do you plan to pay it off sooner than the term? These key factors will help you choose the right loan to ensure that you avoid any unnecessary costs.

By considering these 6 points you can arm yourself with all the necessary tools you need to make the right decision for your needs and can be confident you are on the right path to achieving your financial dreams.