So payday seems but a spec on the horizon and Mum’s got a few spare dollars to tide you over, right? In Australia alone $1.6 billion is borrowed from friends, family and colleagues – every month. Rescu. gives you the top tips to taking out a personal loan to suit your circumstances, and keep you from rocking up to the family doorstep with your pockets inside out.
By Anna McDougall, The Money Maven
Unforeseen circumstances and emergencies aside, the Commonwealth Bank found that around a quarter of the nearly 2000 people surveyed said they hit up a pal or family member when they are low on cash. In fact, women borrow almost twice as much as men and not surprisingly most people turn to their fairy godmother, commonly known as, ‘Mum’ as the first port of call for borrowing $50.
Almost half surveyed have experienced disagreements when it comes to paying loans back and one in five have even lost friends over lending and borrowing money. And it’s so easy these days with internet banking, smartphones and other instant ways of transferring cash!
If the welcome mat seems not so welcoming these days and friends have started barring your calls, it might be wise to take out a personal loan.
Top Tips for Taking out a Personal Loan:
Check your Credit Report before Applying
Your report will indicate how you look to prospective lenders plus checking it will give you the chance to correct any wrong information. This is definitely one situation where you’ll want to look your best.
Learn how you can boost your credit rating here.
Budget, Budget, Budget
When taking out a loan it’s imperative that you prepare a budget and stick to it! Work out carefully how much you can afford to borrow without burning a hole in your account and make sure you’ll be able to make the monthly repayments. Don’t borrow more than you need So maybe partner’s generous and throws in a few extra dollars when you bat your lashes but don’t get sucked into adding extra to your loan. It’ll hurt your interest in the long run and you’ll only be in debt for longer.
Check out the best ways to prepare a budget here.
Know your APR
APR stands for annual percentage rate and is used to compare interest rates for borrowing and is the total (or “gross”) interest you’ll pay over the life of a loan including charges and fees. It allows you to compare loans accuratley against each other. Before you sign-up for a loan, make sure you know exactly what rate you are being offered.
For some simple steps to calculate your APR click here.
Early Repayment Charges
In short, the profitability of your loan is worked out on the amount of time you’ll spend paying interest. Although it is best to pay off your loan as soon as possible, usually lenders will hit you with an early repayment charge. Before choosing your loan, check the early repayment charges that different providers charge.
The Commonwealth Bank discusses early repayment adjustment for you to work out what you will owe with early repayment.
Choose a Fixed Interest Rate
It is generally a good idea to taking out a fixed interest rate loan. You will have the security of a set repayment rate for an agreed period of time, which varies depending on the size of the loan. This is useful as it protects you from random rate increases and market fluctuations.
Do Your Research
Spend plenty of time researching before making an application because (as above) each time you apply for a loan your credit history is checked and this can in turn lower your credit score. Compile offers from each lender and compare the loans using the APR (annual percentage rate), length of the loan and the TAR (total amount repayable). Make sure you understand the costs, charges and terms and conditions of the loan agreements.
Compare loans at www.persoanlloans.com.au
Taking out a loan is a big deal, but knowing what to look for and shopping around for the best deal could save you big time and don’t forget; if you don’t know what you’re signing up for, consult a financial advisor.
