How to Compare Personal Loans - Tips

We will all go through periods in life where we will need extra cash – be it for a new car, a new extension, a much-needed holiday, medical bills or to pay for a wedding. If we don’t have wealthy friends who are willing to spot us a few thousand we may need to look at doing some personal loan comparison between the financial institutions to see who can offer us the best deal. Spending time upfront to do this can save us a lot of money in interest payments and charges.

Thankfully our task is made a little easier in Australia nowadays by the emergence of many personal finance sites that gather together all the best financial deals from across the spectrum of credit cards, bank accounts, home loans, car loans, other personal loans and so on. As well as listing all the deals there are plenty of financial calculators on these sites that make calculating interest payments and repayment totals very easy too.

When you compare personal loans of course you will be looking at the interest rate (APR) offered – this will be high, but should be lower than for a credit card. Don’t get caught out believing that the interest rate is the only factor, as some personal loans will tag on extra fees and charges that can nullify the advantages of a lower interest rate. Personal loan comparison needs to compare fees and charges, such as a loan application or establishment fee (which can be up to $250), a monthly service fee ( which could be up to $10 per month), late fees for missing repayments or penalty fees for early repayment of the loan ( which may cancel out any savings made on interest repayments.)

When you compare personal loans try to compare by comparison rate rather than just interest rate, as this will include most of the fees except early termination and is a more reliable indicator of the full value of the loan.

Another tip when you compare personal loans is to make sure that the term of the loan is the same; a longer term of loan will incur higher interest payments even if the rate is the same.

Using a personal loan calculator is a great tool for helping you work out the finer details of your personal loan, if the loan is a fixed rate of interest. You will be asked to enter some details about the loan you are considering – the principal, the APR, the repayment term and/or the monthly repayment – you can see how a different interest rate will affect repayments, how long the loan will take to pay off if you change the monthly payments etc. This can give you some good guidelines when you are comparing different personal loans, but bear in mind that it does not take into account the fees and charges.

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