Personal Loans

Avoid unsecured loans if possible

Avoid using unsecured personal loans if you can put up some security for your borrowings. This will get you a lower interest rate. A home equity loan, or redraw of extra repayments, allowing you to borrow against the equity built up in your own home or an investment property, is the best option of all, and could get you finance at up to 5 percent less than a car loan.

Be honest in loan applications

Be honest about why you want the loan. Your bank may be able to offer you a loan option that better suits your circumstances. There are an increasing variety of different types of personal credit these days; car loans, commercial loans, leases, home equity loans, are just some of the examples.

Consider smaller lenders too

When shopping around for a car loan, consider community banks, credit unions and other smaller financial institutions which might be more approachable, and offer lower interest too.

Do you have to take out a personal loan at all

Think twice before borrowing money without security. You may have a better option already available; home equity extension to your home loan, a new loan that uses your property as security, a credit card, or even a rich relative.

Don't just take the dealer finance

Don’t accept loan or lease finance offered by a car dealer before comparing the offer with finance options offered by your bank or other credit providers. Dealer finance might be less hassle but you could well end up with an expensive loan and more restrictive terms and conditions. The same goes when buying furniture or any consumer goods where finance terms are offered.

Don't make multiple applications

Don’t fill out applications at several financial institutions and have all of them checking into your credit history. This can make you look desperate and lower your credit score.

Have you considered a credit card?

Consider also a credit card as your source of credit. Interest rates are generally higher but credit cards are easier to secure and offer greater flexibility of repayments.

Honesty counts

Keep accurate records

Keep accurate records of your deposits and ATM transactions. It is also wise to keep copies of your loan application and approval documents in a safe place.

This is the best way to avoid hefty fees which may be charged by a bank when its customers want to see copies of their cheques or loan files.

Know what interest rate applies

When offered car finance, either lease or loan, always be sure you know what interest rate applies. Lenders often ‘sell’ you their finance packages by quoting the monthly repayments only. This may disguise a high interest rate.

Look beyond the big banks

Community banks, credit unions and other smaller financial institutions might take a more approachable and offer lower interest too.

Try lenders with whom you are a regular customer

Take advantage of the human factor. Being a familiar face may earn you some slack if your credit background is smudged.

Understand what's on offer

Is the interest rate is fixed or variable? What up-front, annual or ongoing fees are charged?