Small personal loans are an attractive option for short term borrowing as the interest rates are often more competitive than the interest you would pay on a new credit card. Other benefits include fixed repayment periods that can help you avoid accumulating more debt by paying off your outstanding balance more quickly.
Comparing secured vs. unsecured personal loans
A secured loan uses the asset which you took out the loan to accumulate as a security against the loan. The asset may be seized and sold to pay off the loan in the case of a default. Secured loans are ideal if you are looking to purchase a major asset such as a car and are offered by all major banks. Due to the lower risk to the lender, secured loans usually carry a lower interest rate.
Unsecured loans on the other hand does not require a security and is considered higher risk and therefore will charge a higher interest rate. Unsecured loans under $5000 are more commonly offered by credit unions as most major banks require that you borrow at least $5000.
What to consider before choosing a small personal loan:
When comparing small personal loans, it is important to not only look at the comparative interest rate alone but also the credit history requirement of the loan, excess fees and whether you can afford the repayment amount each period.
A good credit history is important when it comes to loan options that are available to you. The best interest rates may only be applicable to applicants who have a good credit rating. If your credit rating is average or poor, you may have to settle for a less competitive deal.
Below are five financial providers offering a competitive comparison rate based on a minimum loan amount of $5000 and a 1-year repayment period.
|Lender||Comparison rate||Estimated monthly repayment||Establishment fee||Repayment options|
|People’s choice CU||8.35% p.a.||$434.92||$250||Monthly, fortnightly, weekly|
|Bank Australia||9.17% p.a.||$437.65||$150||Monthly, fortnightly, weekly|
|RACV||7.02% p.a.||$432||$360||Monthly, fortnightly|
|HSBC||12.54% p.a.||$463||$150+$5 monthly fee||Monthly|
|CUA||12.83% p.a.||$446||$120||Monthly, fortnightly, weekly|