Small Loans Australia
When it comes to your financing needs, you need assurance that you are only taking out small loans from the right places. Not every lender you will encounter out there will have your best interest in mind. The market does offer a wide range of options these days and choosing the best from the rest of your choices might not be as easy as you think. It doesn’t matter if you only need to take out small loans of $2000 to something more substantial of up to $35000. You must have a good grasp of the charges, fees, conditions, terms and customer support attached to the loan.
Understanding small loans
A form of unsecured financing, small loans typically refer to borrowing not bigger than $5000. Also referred to as short-term instant loans or cash loans, they are very similar to unsecured personal loans. However, since the amounts involved are generally smaller, the market eventually ended up identifying them as a different category. Many of those that sign up for cash loans do so because they wanted to get an alternative to credit cards. The reason for this is because of the following benefits it offers:
- Fixed repayments and interests so you know what you’re getting into upfront
- Both carry almost the same interest rates
- Small loans aren’t a revolving credit line which keeps your spending in check, especially for unnecessary purchases
- The lending guidelines involved with small loans tend to be more flexible. Credit cards are generally issued by major bans while small loans are granted by non-bank lenders. Also, non-bank lenders tend to be more open to diverse risks, so getting approved tends to be significantly easier compared to the credit card approval process that banks require.
Uses of small loans
Australian borrowers are given considerable freedom in terms of how they wish to use the funds from their small loans. These include:
- Engagement ring purchase
- Funding a wedding
- Paying for a holiday
- Covering emergency expenses
- Paying bills
- Debt consolidation
- Buying a cheap vehicle
However, the uses of small loans aren’t confined to what has been listed above. The loan funds can be used for a wide variety of purposes as lenders do not put any restrictions on how the funds are spent. What matters to them is that you can make the repayments on the specific dates you are supposed to. So, if you took out a $5000 loan, you can choose to spend $1500 to get a new home appliance, spend another $1500 to get your car repaired and then spend the remaining $2000 for a family holiday that you have always been wanting to take. Once your loan gets approved, the lender will send the funds to your nominated bank account, so you get direct access to the funds and full discretion on how you choose to spend it.
Selecting the right loan provider
There is a thriving cash loans industry in Australia, considering how a million Australians took advantage of this financing in the past year. Thanks to the significantly high demand for the service, a large number of lenders offering this financing can be found almost anywhere across the country. This does make it harder to select the right one for your needs.
To make sure that you are signing up with the right organisations, it is important to be aware of the specific regulations that they are required to abide by. For instance, small loan lenders must:
- Ensure that the establishment fees they charge for loans no larger than $2000 are capped at 20% and the maximum repayment fee is at 4% every month.
- They are not allowed to offer a 15-day term for loans no larger than $2000.
- In the event of a loan default, they are restricted from charging more than the original loan amount on top of the actual debt.
- They must also abide by responsible lending practices which means that if a borrower currently has an existing loan and has been severely falling behind his loan obligations, then they cannot be approved for another bad credit loan.
While it is easy to assume that with the tight regulations that loan companies must abide by, any provider offering the service would do. However, this isn’t always the case. One must understand that the regulations specify the maximum charges lenders can subject their borrowers too. This does not factor in how there may be lenders who can actually offer fees that are below the maximum allowed and you certainly do not want to miss out on that.
Each customer has their own unique financial circumstances which is why it is common for lenders to operate by assessing the amount of risk they are exposing themselves to per customer. With this, the less risk you are deemed by a lender, the more likely it is that you will get subjected to cheaper rates. higher risk borrowers will likely be faced with more expensive borrowing rates.
There are personal loan providers that offer varying tiers for the loan rates they charge with some starting with a monthly fee of 1% and an establishment fee of 10% and then moving up, depending on a borrower’s credit circumstances.
There are lenders that specialise in offering credit to people with less than fair credit records. They tend to focus their attention on customers who are considered high risk by most lenders and will usually charge these borrowers with the maximum allowed rates. However, for most customers, especially those who are in dire need of cash, the rates that the lenders charge may not be as important as actually getting approved for a loan. For these specialist lenders, the credit scores of their borrowers do not matter that much. Rather, they will care more about their present circumstances, their income source and their regular expenses to determine whether a borrower has the capacity to afford the loan repayments if they are approved.
It is very reassuring knowing that you are dealing with a lender who has a good reputation. Start by checking if they are legitimate. Make sure they are licensed to operate and can offer you the necessary documents to prove that. See to it too that you check reviews from people that have taken advantage of their services before and how their whole experience was, so you get an idea what it would be like to be assisted by these loan providers.
Find out if your online loan offers some flexibility as well. Check the loan terms to find out if you are allowed to tweak the way you manage the loan depending on your financial circumstances. For instance, see if extra repayments are allowed or if you can choose to pay off your loan ahead of schedule. While some lenders may be more than happy if you can do that, there are lenders that will actually penalise you for paying off your loan early.