Personal loans are a reliable way for you to borrow money to cover expenses in the short-term, with an agreement to pay back the sum with interest. They can be used for practically any purpose, such as helping you to buy a car, finance a holiday, or pay urgent bills.
While most lenders will ask you to tell them the purpose of the loan, your answer is usually not a factor in whether you are approved. Approval for a personal loan of any kind depends on if you meet the lender’s eligibility criteria.
A lender’s eligibility criteria will assess your level of risk (your ability to repay the loan) and usually demands that you have a regular source of income as a minimum. The rules and regulations surrounding short-term finance are there to ensure you do not borrow money when you cannot comfortably make your repayments.
The following will examine the 4 main types of loans that fall under personal loans.
Unsecured personal loans are one of the most common ways that people secure short-term finance. These loans are used for a variety of reasons, ranging from debt consolidation to paying urgent bills.
An unsecured personal loan means that you are not putting up any collateral (such as a home or car) that can be seized by the lender if you default. Because you are not securing the loan with any form of collateral, the interest rates are generally higher to make up for this.
While you are not putting up any collateral, if you default the lender can still recover their losses through a variety of means, including legal action. This is why it’s important that you ensure you will be able to make your repayments on time and without hassle before applying for any kind of short-term finance.
Most unsecured personal loans are used to borrow an amount from a few hundred to a few thousand dollars and are repaid over a period of 2–5 years. Repayments are generally made monthly until the full amount (with interest) is paid off.
Secured personal loans are similar to unsecured personal loans except that this time you will be offering collateral against the sum you borrow. Collateral is any kind of asset you own that you will volunteer to the lender in the event you default on repayments.
The collateral you offer up can be almost anything, including property, vehicles, or even your bank savings account. Outside of personal loans, collateral is commonly associated with mortgages, where the real estate you are buying can be claimed by the bank in the event you default on repayments.
Compared to other types of loans, secured personal loans enjoy lower interest rates since you are giving greater assurance to the lender. They are also easier to apply for since your collateral is an asset you already own (rather than relying on your future income).
A fixed-rate loan has a “fixed” interest rate that does not change throughout the life of the loan. This means the interest rate will not fluctuate based on external market factors and will stay the same as the day you agreed to it.
A fixed-rate loan can be favourable depending on the interest rate you secure and how long you will be making repayments. Most people try to be strategic when applying for a fixed-rate loan and secure it when the interest rate is low but expected to increase.
Fixed-rate loans are beneficial in the sense that you will know exactly what your repayments will be over the life of the loan. On the other hand, a fixed-rate loan can prove to be expensive if you lock-in a higher rate than what the market is trending towards.
Variable-rate loans mean that the interest attached to your repayments will be determined by the market interest rate. Since the market is always fluctuating, it means that the interest rate for your loan will change along with it.
If market interest rates are high, then the variable interest rate will increase, and you will pay more. If the market interest rate drops, then you will be paying less.
Compared to fixed-rate loans, variable-rate loans come with a lot more flexibility, but you have less assurance about what you will end up paying. The choice of which type of loan to go with (variable or fixed-rate) will require you to examine several factors, including the financial market climate as well as the specific policies or features offered by the lender.
Cash Train offers personal loans that allow you to borrow any amount from $2,001 to $8,000. Upon approval, this money is then wired to your bank account and, if you are with one of the big four banks, is usually available for you to access the same day.
Cash Train fairly evaluates the individual circumstances of every customer and can still issue loans to individuals with a bad credit history. Any purpose is considered when assessing the suitability of the type of loan you are applying for.
Cash Train loans are unsecured, so you will not be required to put up any collateral. Cash Train will automatically withdraw repayments as per the agreed frequency from the bank account in which you receive your primary income.
When filling out your application, you can choose your pay frequency (weekly, fortnightly, monthly). The cost of your repayments will depend on the frequency you have selected and the amount you are borrowing.
Cash Train is a trusted and responsible short-term lender regulated by ASIC (Australian Securities and Investments Commission). Our Australian Credit License number is 389 198.
EXAMPLE: Our Cash Loans incur a 20% Establishment Fee and a 4% monthly fee, based on the amount borrowed. For example, a small loan of $1,000 over 3 months has fees and charges totalling $320 (1 x $200 + 3 x $40), resulting in a total repayment of $1,320. The minimum loan term is 2 months and a maximum of 12 months. An APR (Annual Percentage Rate) does not apply to Cash Loans.
WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.