Personal Loans 101: A Complete Beginner’s Guide

People often require additional financial support for various reasons, such as home improvements, medical expenses, or unexpected emergencies. Personal loans offer a lump sum with fixed repayments over a set term, making it easier to manage costs or roll multiple debts into a single, more manageable payment.

Whether you’re a young professional just starting out, a parent juggling family expenses or a retiree planning ahead, these loans can provide a clear, straightforward financing solution. 

Let’s explore further what personal loans are and the key factors you’ll need to consider to choose the right option for your needs.

Tailored Loan Solutions: Our Logan brokers negotiate with top lenders to customise your personal loan options and repayments. Reach out on 1800 774 756 or visit www.cubeloans.com.au.

What Are Personal Loans?

Personal loans are sums of money you borrow from a lender and repay in regular instalments over a fixed term, with a set interest rate. They can be unsecured (no collateral) or secured (backed by an asset), and are commonly used to consolidate debt, fund home improvements, or cover unexpected costs. 

Because repayments are predictable, personal loans help you plan your budget and avoid the variable minimums often seen on credit cards.

Personal loans are offered by a range of lenders, including banks, credit unions and online platforms, each with its own interest rates, comparison rates and fees.

Types of Personal Loans

Personal loans aren’t one-size-fits-all. They come in several formats tailored to different needs:

Unsecured Personal Loan

No asset is required as security; approval depends on your credit score, income and debt-to-income ratio. Interest rates and comparison rates tend to be higher, but there’s no risk of losing collateral.

Secured Personal Loan

You pledge an asset, often a vehicle or property, as collateral. This typically earns you a lower interest rate and may allow for a larger loan amount, but missed repayments can lead to repossession.

Fixed-Rate Personal Loan

The interest rate stays the same throughout the loan term, giving you stable monthly repayments and peace of mind against market fluctuations.

Variable-Rate Personal Loan

The interest rate can move up or down with market conditions, so your repayments may change. Some products include extras like a redraw facility or line of credit for added flexibility.

Specialised Personal Loan

Tailored to specific needs, like green loans for solar panels and batteries, wedding loans or medical loans, and often offering lower rates, cashback or flexible repayments to manage project costs more efficiently.

How Do I Qualify for Personal Loans?

Lenders need to ensure that you can make repayments without any issues. They’ll review a handful of financial details before signing you off:

• Credit Score & Credit File: A solid credit score and clean credit history show you manage debt responsibly.
  
  
• Income & Employment Information: Stable earnings verified by payslips, tax returns or recent bank statements.
  
  
• Debt-to-Income Ratio: Total monthly debts (including credit card minimums) should ideally stay below about 40% of your gross income.
  
  
• Proof of Identity & Residency: Valid driver’s licence or passport plus a utility bill or similar to confirm your address.
  
  
• Assets & Expenses: Some lenders also check savings, property or regular outgoings to gauge your overall financial situation.
  
  
• Loan Guarantor (Optional): Having an eligible guarantor can strengthen your application if you need extra support.

Stress-Free Borrowing. Let our Logan brokers find and fine-tune the perfect personal loan for you. Call us at 1800 774 756 or visit www.cubeloans.com.au to get started.

What Rates and Fees Apply to Personal Loans?

Interest rates on personal loans come in two flavours: a fixed interest rate that remains the same throughout your loan term, or a variable interest rate that can fluctuate with market shifts. The rate you’re offered depends on factors such as your credit score, income, loan amount, and the type of loan (secured or unsecured).

Beyond interest, lenders add fees and charges that can include an application fee (or loan approval fee), origination fees, late payment fees, missed payment fees and ongoing administration charges. 

Some products also impose early repayment fees or discharge fees if you pay out your loan before the term’s end. To see the true cost, compare each loan’s comparison rate;  this single figure bundles the interest rate with most fees and charges.

How Do I Apply for and Choose the Best Personal Loans?

Finding the right loan needn’t be a chore. Just follow these simple steps to compare your options and apply with confidence:

1. Check Your Credit Health

Pull your credit report and score to spot any errors or red flags. A clean credit file can unlock better interest rates and comparison rates.

2. Use a Loan Calculator

Enter different loan amounts, terms and interest rates into an online borrowing calculator. This gives you a clear view of likely monthly repayments and total interest.

3. Speak to a Broker

A broker compares dozens of lenders on your behalf, helps you secure competitive rates and guides you through the application, all for free (they’re typically paid by the lender).

4. Compare Key Figures

Line up each lender’s interest rate, comparison rate, fees and loan term. Don’t just chase the lowest rate; factor in application fees, late payment fees and early repayment charges.

5. Gather Your Documents

Collate payslips, bank statements, tax returns, proof of ID (driver’s licence or passport) and proof of address. Having paperwork ready speeds up the application process.

6. Submit Your Application

Apply online through a secure portal or visit a branch. Fill in your personal information, employment details, and loan purpose, then upload the required documents.

7. Review Loan Offers

Once approved, you’ll receive one or more offers. Read the contract terms carefully. Check the interest repayment type, redraw facility options and any discharge or refinance authority forms.

8. Accept and Set Up Repayments

Sign your chosen loan agreement and arrange direct debits for monthly repayments. Then sit back and track your repayments to keep your debt under control.

Hassle-Free Applications.  Experience step-by-step support from Cube Loans’ Logan brokers, from comparing loan details to submitting paperwork. Call 1800 774 756 or head to www.cubeloans.com.au today!

Frequently Asked Questions (FAQs)

How much can you borrow?

Most lenders offer personal loans from around $2,000 up to $50,000 or more, depending on your credit score, income and whether the loan is secured or unsecured.

What options do you need to consider?

You’ll want to weigh up fixed vs variable interest rates, secured vs unsecured loans, comparison rates, loan term length, fees and any extra features like redraw facilities or repayment holidays.

How much would a $10,000 loan cost a month?

That depends on the interest rate and term. For example, a 3-year loan at 8% p.a. (comparison rate) works out to roughly $315 per month (including principal and interest).

What are the three most common mistakes people make when using a personal loan?

Skipping the comparison rate and only focusing on the advertised rate. Borrowing more than they actually need, increasing interest costs. Overlooking fees and charges, like origination fees or early repayment penalties.

What are the 3 C’s for a loan?

• Character: Your credit history and repayment record.
  
  
• Capacity: Your ability to repay, shown by income and debt levels.
  
  
• Collateral: Any asset you pledge against the loan (for secured loans).

What is a credit score?

A credit score is a three-digit number (typically 0–1,200 in Australia) derived from your credit file, indicating how reliably you’ve managed debt in the past.

What to avoid when applying for a personal loan

Avoid applying with incomplete documents, ignoring the comparison rate, making multiple applications in quick succession and maxing out existing credit before you apply.

What can I use a personal loan for?

You can use personal loans for almost any lawful purpose, such as debt consolidation, home improvements, medical bills, weddings, travel, education or even as a buffer for unexpected expenses.

Final Thoughts

That’s personal loans made simple. At Cube Loans, we’re your Logan brokers, covering wider South East Queensland, ready to guide you through every step, from comparing interest rates and fees to setting up repayments, so you can feel confident and in control. 

Our free consultation will help pinpoint the right loan options for your needs and ensure you understand all the details. Ready to get started? Call 1800 774 756 or visit www.cubeloans.com.au to book a chat with our friendly Logan brokers today.