Personal Loans

Lenders generally ask what a personal loan is for, and some purposes are more standard than others. Debt consolidation, medical costs and one-off personal expenses are commonly financed this way; the exact documentation a lender wants can vary by purpose and by lender.

A secured personal loan is backed by an asset (such as a vehicle or savings) and can attract a lower rate than an unsecured loan, but the asset is at risk if repayments aren’t met. An unsecured loan doesn’t require security but is generally assessed more on income and credit history, and can carry a higher rate to reflect that.

Personal loan terms are typically shorter than a home loan, often somewhere between one and seven years depending on the lender and the amount. A shorter term means higher repayments but less total interest; a longer term spreads repayments out but usually costs more overall.

Some personal loans offer a fixed rate for the full term, giving repayment certainty; others are variable and can move with the lender’s own rate changes. Which is available, and on what terms, depends on the lender and product.

Establishment, ongoing and early payout fees can vary by lender and product, which is worth checking alongside the advertised rate, the same as with any other type of finance.

Approval depends on income, living expenses, existing debts and credit history, and different lenders can weigh these differently for the same application, the same general principle that applies across other types of lending.

A personal loan is a new debt commitment, and lenders will factor its repayments into serviceability for any home loan or refinance application that follows. If buying or refinancing is on the horizon, it’s worth mentioning that timing upfront so it can be considered together, not as two separate decisions.