Did you know that Australia’s personal debt is reported as the highest in the world, with the average household owning $250,000?
This shocking statistic reported by the Finder highlights how popular personal loans are in Australia; but what exactly are personal loans? They are a type of loan that you can borrow from a bank, and they are normally general purpose loans that can be used to pay for expenses or to consolidate debt. There are lots of advantages to taking out a personal loan; they can help to pay off debt and they can even improve your credit rating, but it is essential to learn about personal loans before you decide to get one.
Here is everything that you need to know about personal loans.
The Loan Is Unsecured
Personal loans are normally unsecured, which means that you don’t have to use assets (such as your home) as collateral. This means that the loans are much more accessible, as home ownership is on the decline in Australia. It also means that if you are unable to pay the loan back, the bank won’t be able to take your property as payment.
The Loans Normally Have Fixed Interest Rates
One of the main reasons that people avoid taking out loans is because of the interest rates; credit cards in particular can have high interest rates, and this makes it very difficult for people to clear their debt. Thankfully most personal loans have fixed interest rates, which means that the interest rates don’t change for the duration of the loan. However it is worth noting that the interest rates are often based on your credit rating, so if you have a poor credit rating the interest rates could still be quite high!
The Loan Can Affect Your Credit Score
The majority of personal loan leaders will report your loan details to national credit bureaus. This means that the loan can affect your credit score, but this isn’t necessarily a bad thing, as if you make your monthly payments your credit score will improve. On the other hand, if you miss the payments your credit score will drop.
Personal loans are a great option for anyone with a good credit score who needs a loan. This is because they have fixed interest rates and they are unsecured, but it is important to make sure that you don’t miss the monthly repayments.