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Personal loans

A personal loan refers to a “small loan”, $5,000-$50,000, generally unsecured, however occasionally secured against a vehicle.  The loans are used for many things including, holidays, vehicles, to start a business or debt consolidation.  Personal loans have a short term. The maximum term for a personal loan is 7 years. This short term can make them unsuitable for debt consolidation as payments can actual increase as a result.

Unsecured personal loans used to have much lower interest rates than credit cards, making it attractive to consolidate your credit cards into a personal loan.  These days however unless you have security, (e,g, a car with nothing owing on it) there isn’t much difference in the interest rate.  For example NAB unsecured personal loans have an interest rate of 14.5%, but the interest rate on purchases for an NAB low interest rate card is 13.99%.It this situation it would actually make you worse off to consolidate your credit card into a personal loan.

Personal loans are only available to those who have excellent credit. The national consumer credit protection act that was introduced in 2009, requires creditors to make reasonable enquires that the borrower can afford the loan. A default is prima facie evidence that the borrower is in financial difficulty and therefore cannot afford a new loan.  The only lenders still lending to those with bad credit is pay day lenders.

If you have bad credit and a looking for a debt consolidation loan or bad credit loan instead a debt agreement may be an option. A debt agreement allows for your debts to be combined into one agreement, with 0% interest. The trade-off is that there that the debt agreement is recorded on your credit history. However if you have bad credit, and can’t get a loan, the real impact of this is negligible.  If you would like to talk to a Debt Expert about please complete a contact form or call our debt hotline.