If you’re interested in borrowing money for some kind of personal expense, one possible option available to you is what’s known as a personal loan. In this article, we’ll explain what they are and how you’re able to use them. Additionally, we’ll discuss the different options you can choose when you decide to take one out.
What is a personal loan?
Perhaps one of the simplest and straightforward methods in which to borrow money, a personal loan is where borrowers borrow an agreed-upon amount from a personal loan lender for a personal purpose (ie. debt consolidation) which is paid back over a certain length of time.
The vast majority of the time, personal loans are much cheaper than their closest alternative payment option - credit cards - as the interest rate is substantially lower. Further, many lenders provide the opportunity for borrowers to pay the loan back faster which can reduce the total amount of interest paid over the life of the loan.
What can personal loans be used for?
There are many ways in which a personal loan can be used. For example, the more big-ticket personal expenses including (but definitely not limited to) holidays, new or used cars, renovations to your home, a furniture upgrade, that boat you’ve had your eye on for a while… the list is pretty much endless.
But there’s also another very useful way to utilise a personal loan, which is consolidating debts into one monthly payment amount. Let’s take a look at what this means a bit more closely. Let’s say you owe money on two credit cards and are paying off a car:
- You owe $2500 on credit card #1 with an interest rate of 19.99%
- You owe $4000 on credit card #2 with an interest rate of 13.99%
- You owe $15,000 on your car with an interest rate of 11%
Adding all of the debts together for a total of $21,500, each with rather high interest rates. Should you consolidate that $21,500 into one personal loan (paying them all off with the money you receive from the lender) you’ll not only most likely have a drastically lower interest rate - you’ve also simplified it all into one weekly/fortnightly/monthly repayment.
What are the different types of personal loans?
There are two options when it comes to taking out a personal loan; secured and unsecured. What you choose to go with will depend of course on your individual circumstances, but to ensure you’re fully aware of the ins and outs we’ll explain the difference:
Secured: A secured personal loan means you put up ‘security’ against the amount you want to borrow as collateral. This could be a car or other asset you own. The benefit of a secured loan is that you may be eligible for a lower interest rate as the lender will simply sell the asset you put up to recoup the costs if you’re unable to pay.
Unsecured: As you may imagine, an unsecured loan means you don’t want to (or are unable to) put up collateral against the money you’re looking to borrow from a lender.
As stated earlier, it’s really dependent on your particular set of circumstances as to whether you go with a secure or unsecured personal loan. Make sure you review your budget and finances before taking the next steps towards taking out a personal loan.
Discuss your personal loan options with us now
If you’re keen to secure a personal loan at the best possible interest rate available, you need to speak with someone who’s backed by a wealth of experience, has a huge network of personal loan lenders at their disposal and understands your needs to a T.
At Stratton Finance, we pride ourselves in being 100% across our customers’ needs so we can tap into our extensive pool of lenders and find the ideal personal loan solution that matches their requirements absolutely. And with over 20 years operating in the finance industry, you can rest assured we’ve got the experience to deliver exceptional results every time.
So give the friendly team at Stratton Finance a call today on 1300 787 288 to have a chat about what you’re after. If you’d prefer, you’re free to send us an online enquiry and you’ll hear back from us soon.
Disclaimer: Nothing in this article should be assumed as personal advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek advice from a professional financial adviser.