An unsecured personal loan is a loan offered in the absence of collateral and is usually based on your credit history for the expense of personal needs.
It is one of the easiest loans to get.
What You Will Learn In This Article:
- What unsecured personal loan means.
- How unsecured loans work.
- The requirements for an unsecured personal loan in Australia.
- The top 10 unsecured personal loans in Australia.
- The difference between secured and unsecured personal loans and which is better.
- How much money you can borrow on an unsecured personal loan?
What Are Unsecured Personal Loans?
Unsecured personal loans are loans issued based on the creditworthiness of the borrower rather than the collateral, for personal expenses.
It is a loan you can get without the use of any properties such as a car, house, real estate, etc. as collateral, to meet your personal needs. That means, it is collateral-free.
But, a borrower must have a good credit score (which specifies his or her ability to reimburse the loan) before he or she can obtain such a loan
The Benefits Of Unsecured Personal Loans
Unsecured personal loans are beneficial to borrowers who need an instant loan to meet their emergencies. Some of the benefits are:
1. Fewer Eligibility Standards
An unsecured personal loan has lower eligibility requirements than other loans. It considers only the credit score of a borrower. And if you have an average credit score or above, you are eligible to get the loan.
2. No Collateral
Unlike other loans, unsecured personal loans do not need any property as collateral before funding the loan. Thus, there is nothing like a loss of assets if a borrower delays or defaults on repayment.
3. Instant Loan Approval
Unsecured personal loans have very minimal documents and the documents can be submitted online with quick disbursement of the loan. As a result, you can use the loan to meet your emergency needs.
4. Variety Of Purpose
The loan obtained from this can be used for many purposes without the lender asking questions about it.
5. Easy Repayment Options
Because some borrowers find it extremely difficult to meet up with the monthly repayment term, unsecured personal loans provide easy repayment options for the convenience of the borrowers.
The Disadvantages Of Unsecured Personal Loans
Some drawbacks occur in unsecured personal loans which include:
1. Unlimited Loan Amount
Unlike secured loans which require collateral and provide a huge amount of money, borrowers of unsecured personal loans are limited to a huge loan amount because of no collateral, and it may not cover their emergency expenses.
2. Average Credit Score
To get approved for an unsecured personal loan, you are required to meet a specific credit score (average and above).
Having a lesser credit score than the average may lead to disapproval of the loan.
3. Higher Monthly Payment
There are risks attached to unsecured personal loans because of no collateral and these risks impose higher interest rates on the loans which lead to higher monthly payments.
4. Long Period Of Disbursement
Some unsecured personal loans are not funded immediately. Some take 2-5 business days before disbursement as the lender takes their time to evaluate the application due to the risks involved because of lack of tight security and this may affect the desire of the borrowers to fulfill their emergencies.
How Unsecured Personal Loans Work
Unsecured personal loans work similarly to other loans but are provided in the absence of collateral.
It is an easy loan approved for and funded instantly for your emergency needs.
The loan is approved and funded depending on the borrower’s credit score.
Because of the collateral-free in unsecured personal loans, it reduces the security for providing the loan. For instance, if a borrower defaults on unsecured personal loans, the lender cannot claim any property.
Requirements For Unsecured Personal Loans In Australia
To get an unsecured personal loan in Australia, you are required to meet certain criteria such as:
- Age: You must be 18-year-old and above.
- Residence: You must be a permanent resident of Australia.
- Proof Of Income: Provide valid proof of your income such as how much you receive as monthly income, your monthly payment date, etc. This enables the lender to know how much to loan you and provide you with the due date.
- Credit Score: Provide accurate documents of your credit history. It determines the loan amount you will receive and when to repay. Hence, ensure you improve your credit score (average and above).
The List Of The Top 10 Unsecured Personal Loans In Australia.
The top unsecured personal loans in Australia offer the best loans with no collateral for personal usage only. They include:
1. ING Unsecured Personal Loan
ING unsecured personal loan provides from $5,000 to $60,000 loan amounts with an interest rate of 6.99% to 7.20% p.a.
The loan repayment term is between 2 and 7 years. It allows additional repayments with no loan service fee per month.
The establishment fee, however, is $150.
2. NOW Finance No Fee Unsecured Personal Loan
The NoW Finance unsecured personal loan provides various loan amounts from $5,000 to $50,000. The loan term ranges from 18 months to the third year for a $5,000-$8,000 loan while an $8,000 to $50,000 loan has a loan term ranging from 18 months to the seventh year. Its flexibility regardless of your loan amount is funded for free.
The interest rate is based on your credit score: it ranges from 6.75%-20.95%. The better your credit score, the lower your rate.
3. OurMoneyMarket Unsecured Personal Loans
This unsecured personal loan usually provides for car loans with a fixed interest rate of 6.25% p.a.
The loan term lasts from the first to the seventh year. During the first year, the borrower receives a lower rate irrespective of the credit score but in the subsequent years, the rate reproduces the credit history.
It has zero monthly account fees, zero early repayment penalties, and zero exit fees which may be paid off weekly, fortnightly, or monthly.
The establishment fee ($250) is summed with the principal amount and paid over the loan term. However, the fee may be enlarged based on the OurMoneyMarket loan guide and the total loan amount.
4. Heritage Bank Standard Unsecured Personal Loan
Heritage Bank Standard is one of the unsecured personal loans that present the flexibility to select a fixed interest rate from 8.49% p.a to 11.99% p.a based on the borrower’s credit score.
It provides a loan ranging from $5,000 to $50,000 with a loan term of up to 7 years. Repayment of the loan is either weekly or monthly.
Making an additional payment incurs an extra fee for a penalty.
Also, it charges a $200 application fee and a $5 monthly service fee.
5. Harmony Unsecured Personal Loan
The Harmony unsecured personal loan has a fixed interest rate of 5.83% p.a with a 6.62% p.a comparison rate based on a borrower’s credit history.
It provides $2,000 to $70,000 loans with a loan term starting from the third year to the seventh year with the convenience of repaying weekly or monthly.
The total application fee when the loan is funded fully is $575 but for $5,000, it is a $285 application fee.
6. Wisr Unsecured Personal Loan
Wisr is an Australian unsecured personal loan that is easy to apply for and get your loan funded within 2 business days after approval.
The interest rates range from 8.50% p.a to 9.34%p.a (comparison rate) for borrowers with excellent credit scores.
The loan amount ranges from $5,000 to $64,000 with 3 to 7 years of loan terms.
It has a $595 establishment fee and additional repayments are allowed. Also, a penalty does not occur for repaying in time and there is no redraw facility.
7. Our Money Market Low Rate Unsecured Personal Loan
With an interest rate of 6.25% p.a and 6.87% p.a (comparison rate for borrowers with good credit scores, Our Money Market Low Rate unsecured personal loan, offers a loan starting from $2001-$75,000 with a loan term between 1-7 years which can be paid weekly or monthly.
It is accessible and there are no monthly fees involved, but it has an establishment fee of $250.
Paying the loan on time does not incur a fee and it creates access to a free redraw.
8. Liberty Unsecured Personal Loan
Liberty unsecured personal loan provides up to $30,000 loan for 5 years loan term based on a comparison rate of 7.68%-23.5% p.a.
The interest rates start from 7.65%p.a to 21.99% p.a but it depends on their inspection measures and the unsecured personal loan product a borrower qualifies for.
9. Westpac Unsecured Personal Loan
Westpac unsecured personal loan is the top unsecured personal loan in Australia with $4,000-$50,000 loans.
The interest rate is fixed and ranges from 7.99% p.a to 17.49% p.a with a comparison rate of 9.18%p.a to 18.62% p.a.
However, the loan amount depends on the borrower’s credit score.
10. Citi Unsecured Personal Loan
The Citi unsecured personal loan is the best guide and easy loan to access.
It offers $2,000 to $30,000 loan amounts with fixed rates of 9.99%-23.99% and loan terms of the 1st-5th year.
Which Is Better, an Unsecured or Secured Personal Loan?
There is no loan type better than each other. It only counts on your needs.
A secured personal loan is the type of loan offered on collateral. It has a lower interest rate. Security is tight because of the collateral.
It is best for bad credit borrowers.
However, an unsecured personal loan is a loan given based on the borrower’s creditworthiness in the absence of collateral.
It has a high-interest rate and imposes high risks because the lender will not have access to the borrower’s property if the borrower defaults on the repayment.
It is best for borrowers with good credit scores.
How Much Money You Can Borrow On an Unsecured Personal Loan
The amount of money you can borrow on an unsecured personal loan varies but it starts from $1,000 to $100,000. The interest rate and loan term for each amount varies.
Nevertheless, you can get approved for a huge amount of money to cover your emergency needs with no collateral if you have an excellent credit score.
An unsecured personal loan is a loan funded based on the borrower’s creditworthiness in the absence of collateral for the coverage of personal needs including emergency expenses.
It is easy to get but it imposes high interest and risks because of no security. The lender is at a high disadvantage if the borrower defaults on the loan (no authority over the borrower’s property).
The loan amount ranges from $1,000-$100,000 and the interest rates vary depending on the borrower’s loan amount
Here are discussed the answers to some commonly asked questions on Unsecured personal loans.
Which Bank Gives Personal Loan Easily?
The banks that give personal loans easily are USAA and Wells Fargo.
USAA does not reveal a minimum credit score requirement but they regard borrowers with low credit scores (below 640).
Do Unsecured Loans Hurt Your Credit Score?
Yes, they do. Being defaulted on unsecured loans affects the borrower’s credit negatively. Hence, ensure you repay your loan to avoid getting a bad credit score.
Do Banks Offer Unsecured Loans?
Yes. Many national and local banks provide unsecured loans such as unsecured personal loans, etc.
And having a good relationship with your bank creates more room to have unsecured loans with them.
Do Banks Give Loans Without Collateral?
Some banks do while some do not, depending on the loan amount (some banks do not offer loans without collateral for a small amount).
What Credit Score Do You Need To Get A Personal Loan?
You are required to have a credit score of 560 to 660 before getting a personal loan.
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