LOANS

There are many different products on the loan market in Australia and the world and finding the right one for your needs can be difficult. So what are the differences between Unsecured and Secured Loans, Payday Loans and Debt Consolidation Loans? What about Bad Credit Loans or IVAs? Read our guide below or if you know what type of loan you need, just click on the links below to view our comparisons.

Payday Loans

A Payday Loan is sometimes referred to as a fast cash loan or a cash advance. Essentially, this is a short-term loan for small amounts (typically between $100 and $600), loaned to you until your next payday. Payday loans provide a convenient and quick way to access cash and in most cases the lender will approve cash advances even for applicants with black marks on their credit history. They may carry out credit checks but in some cases these do not apply.

Generally, you will need to earn over a certain amount (this varies but sometimes it is $400 per week net is required) and prove this via your payroll. You will also need to be a full Australian resident and prove this too. Application is easy and fast online.

Bad Credit Loans

A Bad Credit Loan is designed for you if you have a bad credit history. That means that even if you have been blacklisted or have defaults you will most likely have your application considered by the Bad Credit Loan lender. The easiest way to find a Bad Credit Loan is via a specialist broker. They take your information, your requirements and how much you can afford to borrow and find suitable lenders on your behalf. Bad Credit Loans encompass a wide range of loan types, including unsecured and secured loans.

So, if you have been refused a loan using traditional methods, don't give up: compare the market of bad credit loan offers – you will probably find that there is a lender out there who does suit your needs.

Car Loans

Buying a car is the second-most expensive purchase that a normal Australian is ever likely to make. It might be exciting as a prospect but not surprisingly the large majority of people don't have the money for a car in cash. Therefore it is important to remember that when it comes to making the purchase, you take your time and make sure you get a good deal.

Most car dealers offer a financing package – but in most cases they carry sky-high interest rates. An independent car loan company could be able to offer a much more competitive deal than the car dealer or the bank.

Lots of banks won't even consider applications from people who don't have a perfect financial track record or the same (full-time) employer for at least two years. Car loan companies now offer a wide range of loan types so all borrowers can find a loan which suits them. Before you finalize your car deal, make sure to check your level of insurance and whether you are getting the best for your money!

Home Loans

Buying a home is the biggest purchase the average Australian is ever likely to make. Not surprisingly, very few people can afford to buy a house in one payment, so finding a good home loan (or mortgage) becomes an essential part of the process. Whether you choose to look directly or go via a mortgage broker, there are many loans to choose from. These days, even though banks are getting tougher on borrowers there are still loans available to people who don’t have an excellent credit rating.

A home loan is a secured loan, meaning that your home is used as collateral. As this means you risk losing your home if you are unable to meet repayments, it is important to consider your payment plans, affordability and financial outlook for the coming years. Most home loans last up to 25 years so they are a big commitment for any person.

Consolidation Loans

Many people find themselves in debt thanks to a variety of reasons – including unpaid credit cards, bank loans and other creditors. They all carry their own interest rates and terms, making the situation hard to keep track of. A Consolidation Loan allows the person in debt to pay off these debts via one monthly payment. In other words, all the debts are consolidated into one place making the situation much more manageable. The interest rate on a Consolidation Loan will be far lower than if you continue to try and juggle various debts.

Unsecured Loans

An Unsecured loan is also known as a Personal Loan. It provides a less risky way to borrow than a Secured Loan because the borrower needn't put up a valuable asset (such as their home) as collateral to receive the loan.

An Unsecured Loan is generally supported by the borrower's credit history rather than his or her assets.

You can usually borrow any amount between around $1,000 and $25,000 with an Unsecured Loan. The borrower may often choose his or her preferred repayment periods but in most cases this is around 5 years or less.

So which loan is best for you?

There are a number of ways to choose the right loan and the easiest is by comparing APR (Annual Percentage Rate). This is a good place to start. You should also consider where the loan is fixed rate (i.e. the interest rate stays the same throughout the loan period) or a variable rate – meaning it could rise or fall with changes to the central bank base rate.

Do I need a good credit rating to get an Unsecured Loan?

Generally, the lender will look at your credit file when deciding whether to approve your loan application. That does not mean that people with a bad credit rating cannot get an unsecured loan. However, the credit rating you have is likely to affect the interest rate on the loan.

Secured Loans

A Secured Loan is a loan in which the individual borrower pledges a tangible asset such as a property or a car as collateral against a loan. The borrower will usually get a favourable rate of credit as well as be able to borrow a larger amount than on a normal Unsecured loan. This is because the lender has the legal option of taking the asset if the loan is not repaid. So the lender has security on the loan and therefore gains less risk.

Why should you consider a secured loan with this risk?

Generally there are three reasons a borrower would opt for a Secured Loan:

  • It is easier to gain because the lender has security on the loan.
  • The borrower can borrow a larger amount of money.
  • The loan can be repaid over a longer period (up to 20 years, although a longer term increases total interest.

The loan can generally be used for any purpose, including paying all your other debts so that payments are in one manageable outgoing and with a more favourable interest rate.

Please remember though: THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR LOAN.

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