Personal Loans: which type is right for you?

Deciding between personal loans can be a time consuming task - but this handy guide makes some of the jargon more simple!

Secured loans
A secured personal loan is one in which the borrower uses an asset as security or collateral for the loan. This means that if you are unable to make your repayments, the lender has the right to take ownership of the asset and sell it in order to recoup their money. This loan is often used for larger purchases such as vehicles.

Unsecured loans
Unsecured personal loans are those for which no collateral is provided. They are generally used for purchases such as holidays, home improvements and in some cases debt consolidation. It is available when there is no physical object that can be used by the lender if you are unable to make repayments. These loans often carry higher interest rates and fees because of the risk the lender is taking.

Fixed interest rate loans
This loan has a fixed rate and repayment amount for a set period of time. This option can often work out cheaper than variable loans, especially when interest rates are generally rising.

Variable interest rate loans
Variable rate loans allow for Reserve Bank interest rate changes to be reflected in the rate you are charged. The repayment periods are not fixed and as a result you can make extra repayments and pay off your loan early.