If you’re one of the many Victorians who has had to put your wedding, overseas holiday, or home renovations on hold over the last two years due to Covid 19, then 2022 could be the year you begin ticking off your big life goals again.
A personal loan could be one way to help fund those big-ticket items in life.
So, if you’re planning on getting a personal loan, it pays to shop around. You really want to do your research before you put in an application. Here are 5 things that could help make that process a bit easier.
1. Focus on the comparison rate
Interest rates can be so baffling, especially as lenders often advertise two rates, an interest rate, and a comparison rate. But what’s the difference? The interest rate is just that – the rate you’ll pay on your loan, however, the comparison rate is what you’ll really pay, as it includes the total cost of the loan including most of the fees such as application, monthly and annual fees.
2. Fixed rates versus variable rate loans. What suits you?
Deciding on whether to take out a fixed or variable rate loan is the next decision to make but it doesn’t have to be a hard one.
If you’re someone who likes to know what your repayments will be so that you can budget, then a fixed-rate loan could be right for you as your repayments remain the same for the term of the loan.
However, if you like to have the flexibility of making earlier payments then a variable loan might work better for you.
“With a BankVic variable rate personal loan, you can make additional payments at any time, or pay your loan off earlier without being stung by exit fees, which is an ideal way to make use of your tax refund or overtime payments.” Amanda Ordon, BankVic Personal Lending specialist shares.
3. Find out what the fees are
When doing your research, look at any fees you may have to pay as these can really add up over the life of your loan. There’s typically an application fee and some lenders charge a monthly or annual service fee. Other fees to be aware of are late payment fees. Some lenders also charge extra repayment fees if you’re making additional payments as well as exit fees if you pay your loan out early.
Ask your lender for a Fees and Charges guide and check out what fees will apply to your loan.
4. Decide how long you want to pay off the loan?
This is an important question to consider. While a longer loan term could seem like an attractive option as it usually comes with lower repayments, you could be paying more in interest over the life of the loan. Have a think about what works best for your budget when deciding. A shorter-term loan could save you over the long term if you can afford the repayments. A personal loan calculator can help you work out what repayments, and interest you’ll pay based on different loan terms.
“At BankVic, we work with members to uncover their personal loan needs and help find a loan term that will suit them. A shorter-term loan is always preferable as members will pay less interest over the term of their loan. However, some people choose a slightly longer-term variable loan with the option to pay it off earlier without exit fees. It really depends on each individual situation.” Amanda says.
5. Prepare a budget to set you up for success
Preparing a budget is a smart way to help you stay on track and ensure you can make your repayments. A budget calculator can make it easy for you to work out your income and expenses each month and help you stay in control.
“We can make it really easy for members to make their loan repayments by aligning their loan repayment schedule to their pay schedule. An automatic payment can be set to come out the day after they get paid, so they don’t even have to think about it. Of course, additional repayments can always be made on top of the automated payments.” Amanda says.
Want some help working out what personal loan would suit your needs? At BankVic, our friendly personal lenders can help work out a solution that suits you. Contact us today on 13 63 73.