Unsecured personal loans – Compare no-collateral options
Unsecured personal loans provide flexible financing that can quickly shape up your plans into reality. Besides that, the bonus for some Aussie borrowers is most likely the lack of collateral requirement. But, in a lending market where there’s typically no such thing as “something for nothing,” what then is the catch when it comes to unsecured personal loans?
Also, how can you find the best, unsecured option for your budget and needs? This guide brings you up to speed with answers to these questions plus more, so you can make a smart choice.
What makes a personal loan unsecured?
An unsecured personal loan delivers the spare cash you need without asking you to offer up any one of your assets in return. That means you don’t have to step up to the lender’s table with collateral in hand if you want to borrow money.
Instead, you’ll have to use other means to win over the lender’s trust. Typically, the finance provider will gauge your creditworthiness or your ability to pay back what’s owed based on two factors:
- Your credit profile. When you submit your application, the finance provider will run a credit check and look at your credit score. A high credit score indicates that you have faithfully paid your debts in the past. This, in turn, convinces the lender that there’s a good chance you’ll also honour the new financing arrangement (low risk). On the other hand, a low or bad credit score might fail to earn you the lender’s good graces (high risk).
- Income and expenses. The finance provider will also assess whether you can afford the loan. A client with more income and less debt inspires confidence and minimises the risk of financial loss. But, if there’s more debt compared to what’s coming in, there’s a higher chance the client will have trouble juggling their repayments.
At the end of the day, unsecured personal loans weigh more in terms of risk for the lender. That’s because the lender can’t automatically go after your car, property, or other valuable possessions if you default. They, therefore, have to roll out stricter lending criteria, to forestall potential financial loss.
Unsecured personal loan details
Here’s a closer look at unsecured loan particulars to help you get to the bottom of how they work:
What’s the cost for a personal loan with no collateral?
The two highlights when it comes to how much your debt will cost are interest and fees. Looking at interest first, some lenders will set the rate based on each client’s credit profile. Others will apply a uniform rate across the board. When you take out an unsecured personal loan, you also have to deal with other fees and charges, including:
- Establishment fee;
- Ongoing monthly fee (for account keeping);
- Late payment fee.
The overall cost of your loan will vary based on the lender. But, if you want a quick tip-off while comparing unsecured personal loans, check the comparison rate. It rolls up the interest rate plus other fees and charges into one percentage, and therefore, represents the “true” cost of your loan.
How much can I borrow?
Broadly speaking, Australian lenders will offer lump-sum payments of $1,000 up to $100, 000.
If you want to borrow enough to cover a big project, you’ll generally need a solid and clean credit history. However, a smaller loan amount not only reduce the risk for the lender (easier approval), they also reduce your monthly payments and borrowing costs.
How long does it take to pay it back?
You’ll get to choose an open window between 1 and 7 years for the payback process. Loan terms can also go up to 10 years, but the longer it takes, the more profit a lender makes off you.
What will my monthly repayments be?
Although your unsecured funds arrive as a one-off, lump-sum payment, the repayment process involves an instalment plan. Each instalment gets you closer to erasing your debt, and BestFind recommends using the unsecured personal loan calculator to work out how you will achieve this. Ideally, your repayments should match up to your budget and other personal circumstances.
What can I use it for?
Signing up for a personal loan gives you a blank cheque to do the following, among other things:
- Consolidate debt (including credit card debt)
- Take some time off for holiday and travel
- Upgrade your home environment (renovations and repairs)
- Spread the cost of your wedding
- Pay for a wide range of medical procedures including dental, IVF, and cosmetic procedures
- Cover any large purchase or payment, from car repairs to school fees and relocations.
Where can I get an unsecured personal loan?
In Australia, you’re a stone throw away from the nearest lender, particularly if you’re searching online. To take it up a step further, our comparison table above offers authorised credit products that are right under your nose and one click away. Besides, the well-known banks like Westpac and NAB, you can also find credit unions and peer to peer (P2P) lending platforms looking to link you up with some unsecured credit.
Am I qualified to apply for a personal loan?
Finance providers generally don’t promise credit approval upfront. But if you meet most of the basic requirements, you’re likely to make the grade. When it comes to lending decisions, most Australian lenders use the following template, with a few exceptions:
- Be an Australian citizen or valid visa holder with a working bank account
- Have sufficient and regular income
- Provide documents such as ID, bank statements, payslips, and proof of residence
What happens if I fail to make repayments?
If there are some repayment hiccups on your side, you’ll be relieved to know the lender won’t be able to move in on your assets. However, this doesn’t mean you have an escape hatch from your debt. If the lender can’t recover their money from you, plan B typically involves taking you to court or enlisting the services of debt collectors. In the long run, this might impair your credit rating or lead you down the path to bankruptcy.
Can I apply for an unsecured loan if I have bad credit?
Unsecured personal loans already get a bad reputation among credit providers for being risky. Once you add a bad credit rating into the mix, the situation can get even trickier. That’s not to say it’s impossible to score yourself an approval in such a case. Still, if you want to give rejected applications a pass, consider the following alternatives:
- Secured personal loans. You can get cheaper credit with easier approval if you put up collateral such as a vehicle or property. Similar to car loans and home loans, this gives the lender ownership rights to your assets if you fail to repay. Thus, they’re more willing to close this deal. Secured loans are not only handy when you have bad credit, however. Check out our comprehensive guide to understand how this type of loan can benefit borrowers with different credit scores.
- Joint applicant loans. This is when you add a second borrower to your application. The person can be a friend or family member with better qualifications who’ll step up to the plate if you fail to make repayments.
Extra benefits to look out for when choosing a personal loan
It could also be in your best interest to keep tabs on these personal loan features if you want a more sleek borrowing experience:
- Flexible repayment schedule. Do you have the freedom to decide on weekly, fortnightly or monthly repayments? If so, it’s important to ensure that the repayments align with your pay date and personal timetable.
- Extra repayments. Will the lender give you a hall pass for extra repayments? The best deal involves zero charges and allows you to save by making short work of your debt.
- Redraw facilities. This is a clever arrangement where the lender agrees to pocket your extra repayments and give them back to you when needed.
Types of unsecured personal loans
- Fixed-rate. Fixed-rate loans have an interest rate that stays on track once established. The upside is your budget also remains on course because of fixed monthly repayments. The downside is, you won’t reap any benefits if market rates fall.
- Variable-rate. Variable-rate loans have an interest rate that typically mirrors the movement of market rates. This can be a cause for celebration when market rates fall, though it’s equally frustrating when you have to adjust your budget and repayments upwards if the opposite happens.
Pros of unsecured personal loans
Here are some top advantages you can expect when taking out credit with no collateral:
- No asset appraisals, therefore, faster approval
- You can borrow money without owning a physical asset
- You can still get competitive rates if your credit score is on point
Cons of unsecured personal loans
As with other types of personal loans, you also get a few disadvantages when you choose an unsecured loan:
- High interest rates – in proportion to the risk the lender is taking
- Usually off the table if you have a low credit score
When should I choose this type of personal loan?
While most people generally love a bargain, there are two main reasons why someone would choose a higher-interest unsecured loan over a lower-interest secured loan:
- They have no collateral. Lenders won’t sign off on your application if you don’t own the right asset.
- They possess a collateral but choose not to use it. It could be that your assets are already backing up your existing debt. Or, you’re unwilling to compromise your ownership of those assets.
Frequently asked questions about unsecured personal loans
How do I apply?
BestFind gives you a convenient, online platform to submit your application with the right lender. Simply click “Go to Site,” get redirected, and start applying.
How do I improve my credit profile to get better rates when applying in the future?
If your credit score needs a shot in the arm, you can:
- Avoid submitting to many applications – these show up in your credit report, making you look less responsible.
- Check your credit score – fixing errors will automatically improve your rating.
- Keep making payments on time – this allows you to build credit over time.
- Build your credit with a credit card – you can also boost your score by borrowing small amounts and repaying on time to establish a positive track record.
How is the comparison rate calculated?
Our comparison website uses a base amount of $10,000 over a loan term of 3 years for this calculation. If different values are used, the comparison rate also changes.
Are unsecured personal loans better than credit cards?
In most cases, yes. Credit cards often charge high rates unless you get one with a reasonable, interest-free period.
Learn more about unsecured personal loans in this short video
.embedtool {position: relative;height: 0;padding-top: 45%;overflow: hidden;max-width: 100%;} .embedtool iframe, .embedtool object, .embedtool embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; } .embedtool .fluid-vids {position: initial !important}
Popular personal loans searches
View all search queries
