When looking for a personal loan, many people choose to focus purely on the interest rate they are getting. In some respects, this is understandable, because the interest rate is the thing we often associate most closely with the overall loan cost. However, it is a myth that you should only focus on the interest rate when choosing a personal loan. If you put all your eggs in the personal loan basket without considering other factors, you could end up with:
- A personal loan you don’t really want
- Dealing with a loan company that don’t offer a great service or don’t have your best interests at heart
- Experiencing high levels of stress during the application process, even before you know whether you’re going to be accepted for a personal loan!
- A personal loan that sees you paying a significant amount of money more than you would have done had you looked closer at the personal loan marketplace and looked beyond the interest rate
This isn’t to say you should not look for a great interest rate on a personal loan, of course you should, but don’t consider it the beginning and the end of your personal loan search.
Here are some other factors you ought to consider.
Personal Loan Period
How long do you have to repay your personal loan? Even if you think you can get a loan with a great interest rate, if there is a lack of flexibility with the personal loan periods you may not be able to afford the repayments.
When you can extend your personal loan over a longer period, this reduces your repayments and increases your ability to repay the loan. As a result, this may mean that you are able to borrow a larger amount and clear more of your existing debts, buy a better car, take a longer holiday, or invest in an even better range of home improvements.
A longer loan period can really help you out and make a difference, which is why at NOW FINANCE we offer repayment periods of up to seven years, longer than many other personal loan providers will offer.
Many personal loan providers will give you no option but to repay your personal loan monthly. While monthly payments are widely regarded as standard and aren’t a problem, if you have the option to repay your loan weekly or fortnightly this can shorten the loan period and save you money on the overall cost.
While some months you may pay more because you’ll have five repayment days rather than four, overall the cost of the loan will be lower, as we have shown in the example below.
- NOW FINANCE personal loan based on borrowing $40,000 over seven years.
- Alternative personal loan based on borrowing $30,000 over seven years.
- Different loan amounts used to highlight potential differences between paying weekly/fortnightly and monthly.
As you can see, opting for weekly or fortnightly payments can help you reduce the repayment amount and the overall cost of the loan.
Customer Service When Taking Out the Loan
Remember that you can speak to personal loan providers before applying, and if you have any questions this is definitely worth doing. It is also worth thinking about how you were treated and how you felt when you made the call, as this can be a great indicator of the type of service you can expect to receive.
You should also look at what is expected of you when you apply for a personal loan with regards to the demand on your time. At NOW FINANCE, we know how valuable your time is, so instead of you spending a combined 20 hours on the application and providing all the necessary documents to a lender, we have simplified the whole process for you.
- NOW FINANCE provides a hassle free 10-minute application
- You can apply online and get your interest rate before you apply
- We tell you what documents we need upfront and first time
- We look to settle the loan within 72 hours of you applying, and will often do so even quicker
This means that with NOW FINANCE you could have a personal loan in your account and making a difference to your life while you would still be sending documents or clarifying details with another lender.
You might save a few dollars by following another lender’s long winded approach, but remember your time is something you will never get back.
Yes, You Should Consider the Interest Rate!
As we mentioned right at the start, the interest rate is something you should consider, as you want to know what the loan will cost. Yet, depending on how much you are looking to borrow, a higher interest rate might not necessarily mean you end up paying a great deal more. This is especially true if you are only looking to borrow a relatively small amount, and may help your thought process when choosing a personal loan as you may choose a provider with a slightly higher interest rate but one that offers much better service and flexibility around repayments.
The table below highlights the difference in weekly repayment amounts based on whether your credit score falls into the “Average,” “Good,” “Very Good,” or “Excellent” categories. You can check out the difference for yourself using our personal loan calculator.
As you can see from the table, even with a higher interest rate you’re not paying that much more per week. While an interest rate of 4% might make you think it’s a significant difference, it is likely that an extra $4.48 per week is well within your scope for affordability. This shows the importance of not looking blindly at the interest rate and thinking you’re getting a good deal. Remember too that other lenders won’t always be as competitive as NOW FINANCE when it comes to personal loans.
Customer Service After Taking Out the Loan
We’ve already looked at service levels when going through the application process, while our very first bullet point at the top of the article mentioned you ending up with “a personal loan you don’t really want.” A big part of this latter point is driven by the service you receive after you have taken out a loan.
Once you have received your loan, you may have additional questions or queries, whether that’s around repayments, your loan account, or something else. It is common when you call them up to be sitting on hold for what feels likes hours, being passed around people until you find someone who can actually answer your query, or having to leave a message so someone can call you back. This is no way to treat customers and is the quickest way to leave you looking at your calendar counting down the days until your final payment.
At NOW FINANCE our focus on service continues right up until you make your final repayment. You will be assigned a personal loan account manager who will be the person you contact every time you need something from us, so no having to explain your situation to someone new each time you call up. All our representatives are based in Australia and can be reached whenever you need them.
There’s More to Personal Loans Than Interest Rates
The interest rate you receive for your personal loan may be important to you, but as we demonstrated above the difference in what it means to you from a weekly payment perspective can actually be negligible. Instead of being seduced purely by interest rates, look at the bigger picture from a personal loans perspective and consider how you want to be treated and how you want to be made to feel by a lender, as well as looking at how flexible your repayment options are.
To experience incredible service for yourself, and to find a personal loan to suit your circumstances, give us a call on 1300 275 669, or get your rate here before applying.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.