Before you start comparing personal loan options, it’s important to understand the different personal loan types available; that way, you can decide which one makes the most sense for your financial situation.
Here are some of the different types of personal loans you can choose from in Australia:
- Secured personal loan: this requires putting down an asset as collateral, which can then be repossessed and sold by the lender if you don’t meet your repayments.
- Unsecured personal loan: opposite to above, this loan type does not require an asset as collateral.
- Fixed interest rate personal loan: the interest rate applied to your repayments will remain the same throughout the loan term.
- Variable interest rate personal loan: on the contrary, interest may rise and fall throughout the life of the loan in line with the market.
- Line of credit: this personal loan functions in a similar way to a credit card. Instead of borrowing money to repay over a set period of time, you will borrow and repay money up to a maximum credit limit (note - you usually only pay interest on the funds you use).
- Overdraft: attached to your everyday banking account, this is a set amount of money that you can withdraw once your debit funds have been exhausted.
Once you’ve selected the personal loan you want, you can compare your chosen loan option across different lenders to find the best deal. Factors to consider at this stage include interest rate, loan term, fees, features, and comparison rate (which we will detail further below).