Personal Loan financing
What is a a Personal Secured Loan?
A personal loan is a loan to an individual that can be used for almost any purchase, including purchasing cars, schoolbooks, holidays or paying off existing debts. The lending criteria can be structured to meet different individuals requirements:
with secured and unsecured loans
Length of loan may vary with individual requirements eg 1 to 5 years
variable vs fixed interest rates
How much can I borrow for a personal loan?
Usually the key aspects in guiding the lending institution of the amount to borrow can include:
How much income do you earn per year Providing payslips
How long you have been at this employment
Good credit rating
If property is secured against the loan, is it mortgaged and if so how much ?
High Risk Personal Loans vs Low Risk Loans
Personal loans are considered more risky than other types of loans. Borrowing to purchase a home is considered a good business decision as well as borrowing to invest in a newfound business. These types of borrowing tend to convince lenders that they are of lesser risk. However personal loans can be used for virtually any purpose and this lack of certainty in investment decision provides lenders with higher risk of default.
What is the difference between secured and unsecured loan
A financial institution may provide a secured personal loan with the offer lower interest rates if security is used against your house or some other security. In case of default the lender is able to seize/claim the security.
However in most cases financial institution provide unsecured personal loans. These are higher risk then secured personal loans because the lender is not able to claim on a security such as your home in case of default. Note. Depending on circumstances they may still be able to claim the amount due in case of default.
Personal loan interest repayments vs time.
The actual repayment of a personal loan depends upon the repayment method chosen by the borrower. Monthly repayments would incur higher repayments of interest then repayments of weekly or fortnightly.
The length of the loan affects how much interest is actually paid. The longer the period of the loan, the more interest you would have to pay.
Disclaimer, the use of this website provides no actual advice is to be taken, refer to your financial institution for quality advice.