Acquisition of personal loans has been on a high rise these past few years due to most personal loans being unsecured. Precisely, you don’t need collateral to take up the loan. A personal loan is money borrowed from lending industries like a bank or can be gotten from lenders online or credit union.
Also, a personal loan could be short or long-termed, and the money borrowed gets paid back to the lenders at a fixed amount monthly or in instalments for a period. This is usually about two to seven years depending on the agreement between the financier and the customer.
Why Take A Personal Loan?
The personal loan method allows quick funding to the customer with low-interest rates and, if online, you will not provide information about credit scores, education, or earnings potential.
In case the customer is trying to reduce high-interest debt, home repairs and renovations, wedding expenses, and vacations, a personal loan can help the customers achieve their goals. It’s also relevant to small enterprise expenses, student loans, nursing home expenses, paying up a credit card debt or using the money for an expensive medical procedure.
Who Can Give You Equipment Finance?
Various institutions offer personal. They include:
- Financial Institutions: You can approach commercial banks, credit unions, investment banks etc. for personal loans. The funding can come in the form of loans, overdrafts and lines of credit.
Choosing the Right Lending Company
It’s vital to choose the right lender for a personal loan. To ensure you can do this, here are the following guidelines put in place by the Australian Securities and Investment Commission (ASIC).
- Your Lender Must Be Licensed: It’s one of ASIC’s guidelines that before a lender gives out money, it must have a license. So, before you make a pick, ensure that the actual lender has a license. To know this, you can check up your prospective lender in the list of ASIC’s licensed lenders in the ASIC’s Connect Professional Register.
- Your Lender Must Provide You with The Credit Guide: As a licensed lender, it must provide you with the credit guide and credit proposal disclosure document, so you can read and make informed choices.
- Your Lender Must Give You A Quote for Providing Credit Assistance: Unless you have agreed on the maximum amount, you will pay for your lender’s services.
Beyond various other factors to be considered when picking a loan option include:
- Interest rate: which is the cost of borrowing money and varies according to lenders but on an average, can be up to a percentage of nine.
- Repayment term: The duration required from lenders varies, can be short or long term. A lender can grant a customer four years to pay back the loan and another two years for that same amount. With the former, the monthly payment might be higher when compared to the first, but the interest rate is lower, therefore, saving some money.
- Origination fees: This can range from one to five per cent of the amount you want to loan. If a customer is to lend five thousand dollars, the money to be paid back will range from five thousand and fifty dollars to five thousand, two hundred and fifty dollars. Lenders charge this one time as a cost for covering processing the loan.
- Prepayment penalty: If a customer pays before the stipulated time, some lenders charge such customer with a few known as the prepayment penalty.
- Funding speed: This has to do with how fast a lender releases the money to the customer. Some lenders propose a same day funding policy or the next day. Also, some take more than that. Hence, choose a lender depending on how quick you want the loan and how fast they can deliver.
Improving Your Credit Profile
If you’re looking to improve your credit profile, here are few tips as provided by ASIC.
Examine Your Credit Report and Score
Ensure there is no error or irregularity in your credit report before you apply for a loan. If you discover any error or inconsistency that could negatively affect your credit score, you can hire a credit reporter to fix it for you.
Discharge All or Some of Your Debt Obligations
Securing equipment finance is pretty much about the history of your past credit loans. Pay your bills on time, resist accruing debts and ensure your existing loan obligations are on track.
Make A Comprehensive Budget
You don’t want to take more than you can payback. If you do, it will affect your next loan application. So, make a detailed budget about your expenses and income for the time being.
Barriers to Enquires About Your Credit Profile
This is important if your lender decides to consider your credit report, you don’t want to make it difficult for them, do you? So, watch out for any barrier.
DISCLAIMER: The data provided above is merely a GENERAL MATERIAL for your use and consideration. They do not, and should not in any way, be considered as financial advice or recommendation from CSHTA. Hence, we shall and do not take liability for faults or mistakes in the presentation or interpretation of the facts highlighted herein. Also, we do not accept responsibility for any analysis and commentary on data present within the public domain. We advise you to consult with an accountant or financial advisor if you need specific recommendations concerning your financial needs or circumstances.