GIVE YOURSELF A CASH INJECTION
CASH-strapped Australians looking for a quick financial injection often use personal loans to help pay for an overseas getaway, new car, a renovation or wedding. While it’s usually a more costeffective alternative to credit cards, consumers are being warned they can be hit with excessive charges if they sign up to the wrong deal. Executive assistant Jorja Larkin, 24, has used personal loans of up to $500 to fund weekends away to ensure she doesn’t run out of cash. “If I want to go to Melbourne for a long weekend it’s good to have a bit more money to go shopping,’’ she said.
“I’m looking at taking out a personal loan of about $2000 to go travelling in January to Asia. I am saving up for it now but want to make sure I have enough cash in my pocket to . . . enjoy myself.” Financial institution ING recently rolled out a personal loan offering and it comes after they launched credit cards last year.
New findings from the bank found about 55 per cent of Millennials thinking about taking out a personal loan said being able to pay it off early is a key consideration before signing up. About 60 per cent said being able to make additional repayments is also critical.
ING’s head of retail banking Melanie Evans said personal loans can be a good way for customers to access cash as they have a set repayment schedule to pay it back.
“Anyone taking out any form of credit should make sure you don’t overstretch yourself,” she said.
“Don’t borrow for something you can’t afford to pay off. And shop around because there’s quite a deviation of rates and terms and conditions in fees and charges.”
Unsecured personal loan rates can start from under 4 per cent but financial comparison website RateCity’s spokeswoman Sally Tindall said it depends on a customer’s credit history.
“If you have a good credit score you can actually get reasonable rates if you shop around,’’ she said.
“Personal loans have a relatively fast approval process but if you have bad credit you can end up with a higher fee, higher loan charges and it could end up being an expensive option for you.”
Personal loan establishment fees usually start at $100 and many also come with ongoing monthly fees at around $10.
Ms Tindall said one of the biggest traps “is a fee for paying your loan out early.”
“This is normally on a fixed rate loan,” she said.
“Some of the loan won’t allow you to make extra repayments.”