How to compare and find the best personal loan

The first thing to check when considering a personal loan is the interest rate – and this brings with it a few considerations of its own:

• Secured or unsecured? A secured personal loan is when you put up an asset as security against the loan, as is often the case with a car loan. This generally offers a lower interest rate while an unsecured loan – with no security required against the loan – has a higher interest rate.
• Fixed or variable? Give some thought to whether you want a loan that’s fixed (usually with a fixed interest rate and a set repayment and time period).

Fees and charges on a personal loan can vary wildly. Some may charge you a fee for early repayment; some may charge you a fee to redraw and so on. Finding the right loan to suit your needs with competitive fees is important.

When you have found some personal loans you’re interested in, you can delve into the fees and charges that apply by asking each lender for a key facts sheet. The fees may include an establishment fee, servicing fee, early exit fee, early repayment fee, insurance and withdrawal fees, and you need to be aware of each before signing on the dotted line.

Personal loans may offer lower interest rates than credit cards. Keep in mind, however, that the longer the period of repayment goes on, the more interest you’re paying. A little flexibility goes a long way in helping you pay it off early and save money, so it’s worth checking the options that are open to you.

While a personal loan is paid back in a set period of time, usually between one and seven years, you may have the chance to pay it back earlier than that.

Ask about what will happen if you pay extra in your regular repayments or as a lump sum, and what fees will apply to paying the loan early.

It’s a good idea to find out the true cost of your personal loan before you go ahead, so you can make sure it’s a viable option for you.

This is why you’ll see a comparison rate listed with personal loans. The comparison rate includes both the interest rate and the fees that form part of the loan, and will always have a term attached to it (for example, the comparison rate may be based on a $10,000 loan paid off over three years with fortnightly payments).

When comparing different loans, make sure you set the same period of time for each so that you can clearly see the real difference in interest rates.

Check out Australian Unity’s personal loans, which offer a range of features to suit your needs.