How Personal Loans Work
The top ten questions answered. Taking out a personal loan can be a big decision, so the last thing you need is to feel bamboozled by the small print or confused by the application process. In this article we’ll take you through the ABCs of personal loans and explain the financial jargon, so that you’ll find taking out your loan as easy as pie.
What can personal loans be used for?
Whether you’re buying a new car, planning a holiday, starting a renovation or just reorganising your finances, a personal loan can put you in control. You might not have the savings right now, but if you find the right loan and can keep up with the regular repayments, a personal loan could be the answer.
What is a fixed rate loan?
Fixed rate means that the interest stays the same for the life of your personal loan, which means your repayments shouldn’t change. A variable rate loan means that the interest rate will fluctuate with the market, so your repayments could go up or down.
How long do I have to pay off my loan?
Each lender has different loan terms. Think carefully before you choose your loan term. If you want to be free of your loan sooner, choose a shorter term, or if you want your loan to have a minimal financial impact, then choose a longer term with smaller monthly payments.
How do I make repayments?
Most personal loans give you the flexibility to make personal loan repayments on a weekly, fortnightly or monthly basis. If you make more frequent repayments, you pay off your loan sooner and pay less interest.
Can I make additional repayments on my loan?
It’s important to check up front whether you can make additional repayments, as not all personal loans allow it. Usually there’s a small fee for paying off your loan early.
How are repayments calculated?
Your repayments will be calculated based on your loan amount, term, fees and your annual interest rate. You can use calculators to work out your repayments before you take out your loan.
Will I have to pay an establishment fee for my personal loan?
Yes, once your personal loan is approved, most lenders will add a loan Establishment Fee (or Approval Fee) to your loan.
How long does it take to apply for a personal loan?
You can apply for most personal loans online and the application process can take anything from 15-30 minutes.
How long will it take for my loan application to be approved?
This varies, so check with your lender. Often your loan can be approved the same day, and the funds transferred to your account within just two working days. As with any financial commitment, it’s important that you think carefully about your loan requirements, do your research, compare loans and have clear understanding of what to expect throughout the life of your loan. We recommend that you always borrow from a reputable and well known lender.
Need a personal loan?
If you’re looking for a personal loan, try GE Money, the personal loan experts.