14 June 2018

Everything you need to know before a life-changing purchase

Maybe it’s time to upgrade your set of wheels. Maybe you’re looking to turn your back patio into that party balcony you’ve always dreamed of. Or maybe you want to check that European holiday off your bucket list. When you’re looking at a major life purchase like these, there’s a possibility you’ll use a personal loan to help you get there.

Before you apply for a personal loan however, it’s best to understand all the factors involved. Here are the top things to study up on before you apply.

How do they work?

The long and short of it is that you borrow money from your bank and then pay the money back in a series of instalments, along with any interest and fees.

Unsecured vs secured

There are two main types of personal loan. Secured personal loans are attached to an asset that your lender can repossess if you aren’t able to make the loan payments. The asset is often the thing that you buy with the loan, like a car for example, but can also be another relevant item with similar value. Sound scary? Don’t stress too much, repossession will usually only occur in the event of a serious default on payments. Meanwhile, unsecured loans don’t use collateral, but interest rates can be higher. Discuss with your bank what your needs are and which type works best for you.

Understand the interest rate

Then it’s time to get an understanding of interest rates. Finding the right loan often comes down to finding the right rate, paired with low fees. A lower rate could mean a lower cost of credit, but make sure you check out a comparison rate first to gauge the real cost of credit. You could end up paying back less overall compared to a loan with a higher rate. It’s also important to check if the interest rate is fixed or variable. If it’s variable the rate can go up or down which can affect your repayment amounts, but for a bit more certainty in your repayments you might prefer a fixed rate loan. Keep in mind that with a fixed rate loan you won’t benefit from the times when the interest rate decreases, like you would with a variable loan.

Get the feel for your fees

Next, understand all of the different fees that can come with a personal loan. Fees can include:

  • Upfront fees, such as application or establishment fees, which can be charged when your loan is approved.
  • Late payment fees.
  • Early repayment fees, which can be charged when you make additional repayments or pay out your loan early.
  • Ongoing administration charges, such as account keeping fees.

Find a loan that helps you save as much as possible on fees. For instance ING doesn’t charge early repayment fees or ongoing monthly and annual fees on its Personal Loan. For customers with an existing Orange Everyday transaction account – or who request one as part of their personal loan application as their funds disbursement account – ING will waive its Personal Loan establishment fee.

Be the early bird

Whenever you can, consider whether you can pay off your loan early so you may pass less interest overall. Though some banks charge early repayment fees for making additional repayments on their fixed rate personal loans, ING doesn’t charge them so there won’t be any surprises for paying back early. Note that additional payments made cannot be redrawn.

Study up before you get started

Above all it’s important to make sure you have read and understood the contract your bank gives you so you fully comprehend the terms, fees and interest rate for your loan.

To get the low down on your loan, it’s best to get in touch with your bank. Find out more about ING’s personal loans and how they can help you reach your goals here.

About to make a big life purchase? Read on to find out all you need to know about ING's Personal Loans accounts.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. Living Super, a sub-plan of OneSuper ABN 43 905 581 638 is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.

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