How to determine the best solution for your financial needs

The type of loan that you require will depend on how much money you need and what you need the loan for.

A personal loan can be used for many different purposes. The two main reasons are consolidating debt or paying off store or debit cards, or you need the money for a specific purpose

The type of loan you require

Before you apply for a loan you need to think about what you need the loan to fund. The most important thing to consider is the interest rate that you will be charged the longer you need to repay the loan the more your loan will end up costing.

Your risk profile and credit record will also determine the type of loan that you qualify for the riskier you are to lend money to the higher your interest rate will be.

You should compare lenders and the terms that they offer to find the lowest interest rate and lowest monthly administration fees. Remember to look at how much the loan will cost in total and ask about any hidden costs that could affect your budget.

Eligibility and the best rates

Lenders expect you to meet certain requirements to apply for a loan. The advertising that you see online usually shows the best interest rates and fees that are available, but these special rates are usually reserved for clients that have a perfect credit score and show little or no risk on their risk profile.

If your credit score is less than perfect, then you will not qualify for these special deals. Depending on how risky you seem as a client you may end up paying a lot more than you expected.

Benefits of personal loans include the following:

• If you have a bad credit history, you may still apply but you need to make sure you are being charged a favourable rate
• These types of blacklisted loans are very easy to apply for, the lending criteria is not very strict, and you will receive a decision in minutes.
• You can choose between a secured or a non-secured personal loan
• The money can be paid into your account on the same day that your loan is approved
• These types of loans are 100% free to apply for and are obligation free
• There are no restrictions on what the loan can be used for.

Once you know how much money you need to borrow and what the money will be used for you can determine the type of loan that best suits your requirements.

If for example, you're looking at buying a new car then a car loan might be a better solution for you than a personal loan will be. This is because a car loan is designed specifically to help people get behind the wheel of their new car while a home loan is designed to get you moved into your dream property.

Vehicle financing available to Australian citizens

In Australia, the car loan industry is very competitive this is great news for those looking for a good deal on a car. The type of car loan you apply for will depend on the amount you have to put down as a deposit on your vehicle, whether you have a car to trade in and how risky your credit profile is.

A car loan is very similar to a personal loan except for the fact that the vehicle you are buying now acts as collateral against your loan. This means that if you don’t make payments on the loan you are at risk of losing your vehicle.

Read and understand your loan contract

It's important to know what your contract consists of and how much the loan will cost you. Look at the interest rate and the other fees, and make sure that the repayment terms are flexible and that you won’t be charged extra to pay back the loan early. Car loan terms usually range between 1 and 7 years. The lifespan of your loan will affect your repayments and your loan affordability.

There are often many restrictions associated with car loans, so you need to make sure the car that you have your eye on is eligible for vehicle financing. The age and type of the vehicle may be restricted.

When purchasing a vehicle, it’s advisable to purchase the newest car that you can afford. If you can purchase a second-hand car you are buying problems that you might not realise. New cars come with a lower interest rate as the lender is taking less of a risk by providing financing for it.

Opening a line of credit

If you own your own home, you will be able to borrow against its equity up to a certain amount. The amount that you qualify for will depend on how much your property is appraised and the amount that you still owe on your mortgage.

These loans are usually used for home improvements or to consolidate your debt into one easy-to-manage loans. The interest rate can be tax deductible and are quite low.