The word “loan” often brings up feelings of fear and uncertainty and for many it can feel overwhelming, leading to questions like “Where do I start?, What do I do? and What do I need?”

The truth is, researching and applying for a personal loan can be as easy as a Jamie Oliver recipe. With a few simple steps, you can cook up some “Pukka Tukka” for the family and have a menu that could include a new car, holiday overseas, or new pool to be enjoyed with friends on summer weekends!

HOW MUCH CAN I BORROW?


Online borrowing calculators provide a great starting point for those interested in a personal loan but are unsure of how it might affect the weekly budget. They are a very useful tool for providing an estimate of how much money you can borrow and also the repayments. It is a good idea to spend some quality time with an online loan calculator such as the one from People’s Choice Credit Union to get a better understanding of what you could afford to borrow in your current situation. The last thing you want is to eat baked beans on toast for dinner every night just to make the repayments, unless of course you are a huge fan of baked beans.

It is also recommended to build into your loan budget some “elbow-room” to allow for unexpected costs and those high expense periods such as Christmas.

WHAT INFORMATION DO I NEED TO PROVIDE FOR A PERSONAL LOAN?


Knowing what to provide can make the process of applying for a loan easier. Listed below are some of the common considerations you will need to provide when applying for a personal loan.

1. Evidence of your income. This could include pay slips, pension, overtime, allowances, rental income, commissions and child support. In general, you will need to provide evidence of ongoing employment of at least three months and if you are a casual employee it can be six months.
2. Details of expenses. How much you can afford also depends on your ongoing expenses. The lender will need to see things like utility bills, rent, board, loan repayments, credit and store cards, maintenance and lease payments. The more your existing financial obligations are, the less you can borrow. It’s a simple formula.
3. Asset information. Depending on the loan type and how you intend to secure the loan, you may need to show cash savings, value of motor vehicles, shares, bonds, property, furnishings etc.
4. Residential and employment details. You’ll need to supply evidence of where you’ve lived and worked for the last three years.
5. Driver’s license number. Supply of a current driver’s license is standard in loan applications.
6. A clear idea of the purpose of the loan. Most lenders will only lend money for what they deem is a worthwhile purchase, so be ready with your answer.

A few quick tips!

• Demonstrating a commitment to saving and paying off previous debt will often help you through a Personal Loan application process. So, if you are thinking of applying for a loan, give yourself the best possible chance and start saving now!
• You can often get a better interest rate by using your car as security for the loan.
• Do your homework! Watch out for those hidden costs like ongoing fees and early repayment penalties.

DECODING THE LANGUAGE OF THE LENDERS


Lending terminology can be confusing if you have never borrowed money before, and some of the acronyms can leave you feeling like a tourist in a foreign country; confused and disoriented!

Here are some of the more common terms – we recommend you get yourself familiar with the lingo.

Liability – Your loan
Equity – The amount that you have paid off on the liability – the more you pay off, the more equity you have
Variable Rate – The rate of interest you pay can change, up or down, over the term of the loan
Fixed Rate – The rate of interest you pay is fixed for a set period
Per Annum – Each year, often abbreviated as p.a.
Monthly Fee – A fee charged each month on the loan by some lenders
Application Fee – A fee you pay when you take out a loan with some lenders
Arrears – Missed loan repayments
VEDA – A credit reference company where lenders request and obtain information on your credit history
Security – The asset that is held until the debt is paid off. It can be retained and sold by the lenders if the debt is not paid, so be mindful when using another asset as security for a loan.
PPSR – Personal Properties Security Register – A national register where financial institutions record their interest in a personal asset, usually a car

For more information on the range of personal loans offered by People’s Choice Credit Union visit their website.

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