Personal Loan Home Truths

Post by Sharat on June 7, 2018 · Under loans · Comments Off on Personal Loan Home Truths 

Personal loans are probably the cheapest way to borrow money. Not only do they allow you to fund big purchases or expenses, you can use them to consolidate outstanding credit card debt and establish a good credit history. You should be aware though, that not all personal loans are created equal and borrowers tend to misunderstand them. Here are a number of myths surrounding personal loans that you should not be believed.

The best place to start is not necessarily with your bank

It may seem like the simplest way to apply for a personal loan is through your existing bank, however if you do that, you cannot guarantee you will get the lowest interest rate possible. Rates in Australia can range anywhere from under 10% to a massive 17.57%, so you cannot be sure your existing bank is offering the best deal. Make sure you compare interest rates and then decide on a loan which provides you with the lowest interest rate possible. At the very least if you know what’s out there, you can haggle for a better deal from your bank.

Banks are the only sources of personal loans

The big banks depend on borrowers believing they are the only trustworthy lenders out there. The truth is that there are plenty of other sources of finance that are equally trustworthy and if you do a little homework you will find that non-traditional lenders offer highly competitive interest rates. You can obtain loans from peer-to-peer lenders, credit unions and mutual, all of which are registered and regulated by ASIC. The regulator forces the lender to behave responsibly which means making sure you can afford the loan you are applying for.

A personal loan application does not hurt your credit score

There should be no impact on your credit history if you apply for a personal loan since you have not received any credit yet. In fact, if you apply and obtain a personal loan and make all your repayments on time, that is a great way to build up a positive credit profile. What you need to do is avoid applying for multiple personal loans simultaneously because that will raise red flags.

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