Whether you are buying a house, a new car, or starting a new business, you need funding. Personal loans will come to your rescue at this point. Did you know that more than 23% of Australians have or will have some personal loan? Surprising, isn’t that?
The need for loans has spiked with the increase in vacations, desire for holiday homes, new cars, and overhaul of homes combined with inflation. But what type of loans are available, you might wonder. This article will solve your queries regarding the various personal loans available. You’ll also understand when you can take out a loan.
Reasons to take a personal loan
There are several reasons to take out a personal loan. You might often face a financial crunch, so you might need a loan to pay your utilities merely. Moreover, you might need loans to achieve your financial goals and accomplish specific dreams on your bucket list.
Succinctly, here are some of the reasons you might need a loan:
- To buy a new car
- Property investment
- Getting a new holiday home
- Arranging the wedding of your dreams
- Medical emergencies
- Purchase furniture and appliances
These and much more reasons exist to get a personal loan. With the prices of goods and services skyrocketing, it is only prudent to apply for a loan.
Types of personal loan
Several options exist for choosing the right personal loan. You need to ensure you analyze your needs, financial situation, and several other factors before picking the type of loan. Moreover, you must ensure you read your documents’ fine print.
While you are analyzing, you’ll find it helpful to know that the following types of loans exist:
1. Unsecured loan
You can take up an unsecured loan if you don’t want to use your asset as collateral. They have lower interest rates. But they can be expensive if you fail to repay your loans on time.
2. Secured loan
You can take up a secured loan if you have assets to put up as collateral. Collateral can involve paper of your house, cars, jewellery, or any other asset. If you fail to repay your loan, the lender can take possession of your asset.
These loans have low-interest rates and low repayment fees.
3. Fixed-rate loan
A fixed-rate loan is a type of loan with a fixed interest rate. This means you can get a loan without worrying about fluctuating interest rates. Moreover, your repayments will remain the same throughout your loan cycle.
4. Variable-rate loan
A variable rate loan means your repayment will fluctuate depending on the market interest rate. In this case, it can prove beneficial if the interest rates dip. The contrast is proper. You can find yourself in a hassle due to the sudden hike in interest rates.
5. Student loan
These are loans you take when studying at a university. The rising university tuition and accommodation fees mean that you need financial help to be a good student. In these loans, you might avoid an upfront fee, and it can be deferred for five years.
6. Overdraft loan
This loan offers you a line of credit. You can borrow money from the bank and overdraw your account to an agreed amount. You pay interest on the money you use.
Personal Loans can prove lifesaving if you have a medical emergency. Also, you can use it for your leisure requirements. You need to bear in mind that several types exist. However, irrespective of the type, you will incur interest, charges, and fees during your loan term. So, you need to read your loan documents carefully.
You can access several types of loans: secured, unsecured, student, fixed-rate, variable-rate, and overdraft. You must check the fees, interest rate, repayment dates, and borrowing amount. So, research thoroughly before you take out a personal loan.