When you need to access funding quickly, getting a personal loan is one option that's likely to come to mind.
A personal loan might make sense for you if you have other expensive loans that you want to consolidate, or if you need to pay for a big-ticket item that you haven’t budgeted for.
Personal loan interest rates are usually lower than credit cards if you have a good credit history, however it can be hard to make sense of what the loan will actually cost you.
What will a personal loan cost, and will it impact my credit?
A review from financial comparison site Mozo shows one lender advertising a rate of 6.99% (as of November 2019), but notes the comparison rate for the same lender can be as high as 29.55%. There are two main reasons for this massive disconnect between the advertised rate and the actual rate you end up with as a consumer:
- Lenders often advertise their ‘best rate’, which often only a tiny fraction of customers can access. This ‘best rate’ is often very different to the rate you are likely to see as a consumer.
- Personal loans often include ‘application fees’, ‘upfront fees’ and even ‘monthly fees’ and other costs buried in the small print, which often means you end up paying far more than the advertised headline rate.
This can make it hard to know the true cost of the loan before you apply.
What’s involved in getting a personal loan?
To work out if you qualify for a personal loan, the lender will check your income and expenses to determine if you can afford the loan and the repayments based on their lending requirements and contingencies. Sometimes this is straightforward, but things can get messy if you're self-employed, approaching retirement age, or have investment income to consider.
On the expenses side, it can be just as complicated. If you recently went away on holidays and had higher expenses than usual, should the lender assume you will keep spending this way? These are some of the complexities associated with borrowing money that can make it a painful experience.
The lender will also check your credit, which can leave a mark on your credit file, even if you don’t end up taking the loan.
Is there a better alternative to personal loans for property investors?
Futurerent is a loan-free alternative to the banks that gives property investors up to $100,000 of rent in advance. This enables property investors to manage their cashflow and get ahead, without the red tape and strings you'd usually expect.
If you’re a property investor and want a simpler, faster and more consumer-friendly solution, find out more about Futurerent and what we can do for you.