What is a personal loan?
A Personal Loan is a personal finance product where the financier lends the customer funds which can be used to purchase a car, but does not hold any security over the loan. Personal Loan can also be known as an Unsecured Car Loan.
How does a personal loan work?
Under a Personal Loan the financier advances funds to the customer, which the customer can use to purchase a car. The customer takes ownership of the vehicle at the time of purchase, and must repay the loan to the financier over the agreed terms. The financier does not hold the vehicle as security for the loan.
- Flexible contract terms ranging from 12 to 84 months (one to seven years)
- Fixed or variable interest rates
- Debt consolidation
- Flexible repayments
- A tax deduction may be available when the vehicle is used for business purposes*
* Please refer to your accountant for eligibility.
Your guide to personal loans
Read our helpful guides to personal loans and get to know how a personal loan can help you
If you are considering a personal loan, you may have come across the term “balloon payment.” What is it? A balloon payment is a common term for a “residual value payment.” This is a lump sum deferred until the end of your loan term. The benefit is that you pay less in monthly repayments over the life of the loan.
The downside is that you’ll have to come up with the full balloon amount in a short space of time at the end of your loan term. It is possible to refinance balloon payments, but that will attract more interest. You should talk to a financial professional first to see if a balloon payment makes good financial sense for your current financial situation.
Sometimes people are not approved for personal loans and could have some roadblocks to clear prior to gaining approval for a personal loan. One of the most common obstacles is your credit history. Your credit history may have defaults on it, which means lenders are reluctant to approve your loan.
You could have made mistakes in the past, so you should check your history and correct them before applying. Another roadblock is high existing debt. You should pay existing debt down first, or consider a personal loan to consolidate the debt and apply for a new loan after the debt is cleared.
When holidays or little emergencies come up, a lot of us might be tempted to put it all on the credit card. Though it’s more convenient, a personal loan is likely the better option. This comes down to simple economics; a personal loan will cost you less in interest than most equivalent credit cards.
Credit card interest ranges from 8%p.a. to as high as 24%p.a. Personal loans, on average, come in below those rates. Also, you pay fixed repayments; minimum repayments on your credit card will only attract more interest. Though you won’t have to apply for a credit card you already have, a personal loan makes more financial sense in the long term.
Many of us know personal loans are for holidays, wedding, renovations but they are used for much more. Banks and lenders will approve personal loans for household goods, education. It is also commonly used for lifestyle equipment such as a pool, boat, big screen TV, jacuzzi, or marine equipment.
You can also use personal loans for purchasing new or used vehicles. However, as most personal loans are unsecured, you will likely pay a higher interest rate to offset the risk your lender is taking on. Other common uses are debt consolidation loans, to pay off many debts under one facility.