subject: What Are Personal Loans? [print this page] Personal loans in Australia are given to individuals for the short term to tide them over a financial crisis. This service is provided against interest and the borrower is expected to pay back the money in regular installments. The usual reasons for taking a personal loan are surprise gifts, unexpected medical emergencies, a function in the family, holiday expenses, travel expenses, or marriage expenses. Personal loans are of two types; secured loans or unsecured loans. In secured loans, the loan is made against collateral like your home or property and you are liable to lose this if you default on repayment. Unsecured loans are given at higher interest rates and the creditor usually has to seek legal recourse in the event of nonpayment.
Pros and Cons Of Obtaining Personal Loans In Australia
Obtaining personal loans in Australia is not so difficult anymore but it is better to be aware of the pros and cons of taking a personal loan. The biggest advantage is its availability at short notice. It is not necessary to go through the long tedious process of loan applications when you are cash strapped and in dire need of some financial help. There is no need of collateral and you are not restricted in the way you have to use the money. The loan tenure is shorter and there is less risk if the borrower is unable to make the repayment. The main disadvantage is the high rate of interest charged by the lender to offset the risk. Availability of the loan also depends on your credit worthiness. Lenders do not usually allow you to make part payment of loans.
Unsecured Personal Loans
When taking unsecured personal loans in Australia, the first rule is that you do not borrow more than you can pay back. The interest rates are high since the lender has no collateral to fall back on. The interest rate should be fixed and the documentation scrutinized carefully for hidden costs or additional fees. Also the borrower stands to lose his credit worthiness and therefore puts future loans in jeopardy if he defaults on repayment.
Importance of Comparing Personal Loans
It is better to compare the fine print on documentation of personal loans in Australia before going ahead with it. This is because interest rates are usually high and if you have the option of negotiating with the lender, it is better to do so. It is also important that you shop around and compare different agencies before you commit so that you can make an informed decision.
