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money-4 What is a Personal Loan?

What is a Personal Loan?

A personal loan is a cash advance provided by an online lender, like OurMoneyMarket, or a bank, which can be used for any kind of personal expense. For example, paying off debts, preparing for a wedding, buying a new car, renovating your home etc.

How do personal loans work?

Personal loans are pretty similar to home loans, in so far as, you make regular repayments of principal and interest to the lender until the total loan amount you borrowed is fully repaid. The difference between a home loan and a personal loan however is that with a personal loan the lender will typically transfer you cash so that you can purchase whatever it is you need.

Are there different types of personal loans?

There are basically two types of personal loans; (1) a secured personal loan; and (2) an unsecured personal loan.

Secured Personal Loans: This is a cash loan that is secured by some kind of asset, such as a car, motorbike or boat. If you fail to meet your repayment obligations on the loan the lender is able to repossess the asset you pledged as security for the loan (i.e. the lender can take the asset away from you). Given you have provided a form of security to the lender the interest rates on secured personal loans are lower than unsecured personal loans, as the risk to the lender is lower.

Unsecured Personal Loans: This is a type of cash loan in which you don’t provide any security towards the loan. Usually convenient for those borrowers who aren’t purchasing an asset that can be pledged as security (i.e. the loan is for debt consolidation) or the borrower doesn’t own any large financial assets (e.g. car, boat etc.) and therefore can’t offer the lender any security. As the borrower is offering no security the personal loan interest rates for unsecured personal loans are higher than secured personal loans. This does not however mean that if a borrower fails to repay an unsecured personal loan that they can walk away from their debt. The lender can typically obtain a court judgement to either repossess any assets the borrower has or alternatively garnish the borrower’s wages, amongst other things.

Personal loans can either have a fixed rate or variable rate. What’s the difference? A fixed rate means that as a borrower you have a fixed interest rate and fixed repayment for the life of the loan term. That also means there are no nasty repayment surprises. A variable rate means that the interest rate on the loan can change over time. This means that your loan repayment may go up or down over the course of the loan. OurMoneyMarket only offers fixed interest rate loans.

How do you get a personal loan?

If you’re wondering how to get a personal loan rest assure there are a range of online personal loan lenders available to you, though if you would like to apply for personal loan now click here. The process is 100% online and takes approximately 5 to 10 minutes to complete the application form. To be eligible for an OurMoneyMarket personal loan you will need to meet the following criteria:

  • Be 18 years or older;
  • A permanent Australian resident or valid visa holder;
  • Earn more than $25,000 a year (after-tax); and
  • Demonstrate steady employment (whether casual, part-time, full-time, contract or self-employed) or be on the pension.
  • Looking for a personal loan? Click here to get started or alternatively call 1300 990 115 to speak with one of our friendly customer service representatives.

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