When searching for the best personal loan, the most important factor is you. Your individual situation will determine which loans you’re eligible for and what type of loan you need. We’ll walk you through the steps to choose the right loan for you.
Harmoney Unsecured Personal Loan
- Borrow from $2,000
- 100% online
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Harmoney Unsecured Personal Loan
Apply today to get approved within minutes for up to $70,000.
- Max. loan amount: $70,000
- Loan term: Up to 60 months
- Turnaround time: 99% of approved online applications funded in 24 hours
- Fees: Establishment fee of $200 for loans from $2,000-$5,000 and $450 for loans from $5,000-$70,000
- No early repayment fees
- Personalised interest rates based on your circumstances
Updated February 21st, 2020
The best personal loan for you depends on your own needs and circumstances. You should think about why you need the loan and over what term. Remember, the best loan for you is one you can afford, is flexible enough to adapt to any change in your circumstances, and doesn’t have any hidden terms or conditions.
Fees, charges and the interest rate are also important aspects for you to consider. Make your own decision, but if you need help, seek professional advice rather than committing to a loan that is not suitable for your needs.
When applying for a personal loan, compare multiple loans and consider the following factors:
- Secured vs unsecured loans
If you get a secured personal loan, you stand to lose the asset you have used as a guarantee, in the event you have a problem making repayments. An unsecured personal loan, on the other hand, offers no such risk but attracts a higher interest rate.
- Interest rate
Not all personal loans offer the same interest rate, so compare the personal loan interest rates of multiple loans before signing on the dotted line.
- Fees and charges
Some personal loans attract prepayment penalties, late charges and application fees. Comparing these extra costs is important when you are trying to determine the true cost of the loan.
- Loan term
While a lower interest rate might seem promising at first, you should also compare loan terms. This is because the shorter the loan’s duration, the less you pay in the form of interest over the life of the loan.
If you’re still not sure how to choose the right loan to meet your needs, ask yourself the following three questions:
Think about why you are taking out the loan and what you need from it. For example, you might need the loan to buy furniture as well as a car; and you may also want to be able to make additional repayments.
Compare the types of loan you want to apply for. Personal loans can be secured or unsecured, can be taken out in the form of a line of credit or an overdraft facility, and you can get loans with fixed or variable rates. Compare different loan types according to their features and find one that offers you everything you need. Then, check the eligibility criteria to make sure you can apply for it.
You need to find a loan you can afford. Check whether the loan charges a fixed or variable rate, look for upfront and ongoing fees and see how flexible the repayments are. Make sure the ongoing repayments are affordable for your budget.
- Online applications can offer quick turnaround
The application process is quick and the majority of lenders allow you to complete the whole process online. Some lenders, including some major banks, offer same-day turnaround for personal loans.
- Wide range of personal loans available
You can choose from secured and unsecured personal loans; as well as lines of credit, car loans and even peer-to-peer loans.
- You may not be approved
As some personal loans do not require any form of security, you can expect strict eligibility criteria. If you don’t have a good credit rating, your chances of approval are slim.
- The loan purpose might be restrictive
Depending on the type of personal loan you choose you may be restricted as to how you can use it.
Finding the best personal loan
Many personal loans claim to be “the best”, and that is just what Sam found when she set out trying to find one.
Sam needs to purchase some furniture for her house and also finance a holiday she is planning to take, so she wants to borrow $7,000. Sam has good credit and a full-time job and based on her salary of $50,000 p.a. (and taking into account her other expenses), she works out she can comfortably afford repayments of $250 per month. Sam decides that an unsecured loan best meets her needs, as she isn’t purchasing an asset she can attach the loan to, nor does she own her own home.
As unsecured loans tend to have higher rates, Sam finds one with minimal upfront and ongoing fees to help keep her costs down. She compares her options and finds a loan with a comparison rate of 14.26% that she can repay in three years, which makes her repayments $241 a month. There is also no penalty for early repayment if she finds herself able to repay it early.
While personal loans are helpful in many scenarios, it is in your best interest to avoid certain traps and pitfalls.
- Read the fine print.
Scrutinise all your options carefully right from the start and remember to look for ongoing account-keeping fees, early repayment fees and late payment fees. Read the terms and conditions document from start to finish.
- Check the lender is licensed.
There are credit brokers and providers in New Zealand who operate illegally. If you want to safeguard your interests it is best that you do your research to avoid these lenders.
- Don’t take on a loan you can’t afford.
When borrowing money, it is always important to use a calculator to find out what your repayments will be. If you can comfortably afford a certain amount on a loan, don’t feel tempted to borrow more, just in case circumstances change and you are unable to meet repayments.
Before you apply for a personal loan, establish how much you want to borrow and your monthly repayment ability. You should find out how long it might take for you to pay the loan off completely, remembering you can usually choose between making weekly, fortnightly or monthly payments.
If you are buying an asset such as a car you can apply for a secured loan, where the car acts as collateral, and you then have the choice between a fixed or variable rate.
Remember, lenders will want to ensure your ability to repay a loan before they lend you any money. As a result, they might want to take a look at your credit file and may also ask for copies of your payslips; details of other loans you have; credit card bills and bank account statements.