We’ve all heard about the dangers of payday loans, but bank loans can also slug unsuspecting customers. Research from financial comparison website Mozo has found many Aussies are paying more than they expect after signing up for personal loans.With interest rates at record lows, personal loans can be a good way for Australians to get the money they need to cope with an unexpected loss of income or medical bills. However, it’s vital to do your homework before you sign on the dotted line.
Kirsty Lamont, Mozo’s director of marketing and communications, has urged customers to read the fine print to make sure they won’t get slugged with massive fees. Application fees, for example, can cost up to $600, she explained. “To avoid this extra cost, look for personal loans with zero application fee, or apply for a loan with a competitive enough rate to outweigh the cost of an expensive upfront fee,” she suggested recently when speaking to news.com.au. She also suggests comparing ongoing fees, as these charges of up to $13 can quickly add up on large loans with long terms. In just five years, your loan could cost you an extra $780. Just imagine what you could do with that money!
Once you have your loan, make sure your payments are always prompt and in full. Direct debit the loan amount if you think your repayments could slip your mind, but make sure you always have the balance to cover any automatic payments. Typical late fees sit around $20 but some financial institutions charge up to $50 for late payments. While exit fees were outlawed on variable rate loans in 2011, some banks still charge them for fixed-rate loans. Paying off your loan early might sound like a great way to avoid interest charges, but the break fees some banks charge can hurt you. Loan calculators aren’t always a reliable tool for comparing loans, as only 21 percent disclose loan establishment fees. Fewer than that mention direct debit and servicing fees. Instead, use comparison websites to find loans that represent the best value. A personal loan can be a good stop-gap financial measure, but nothing beats growing your wealth so you can take care of emergencies and treat yourself to life’s little luxuries.
If you want to experience true financial freedom and forget about relying on the banks, call Chase Edwards on 1300 854 833. Our financial experts can help you reduce your debt, save for the future, and feel more control of your money today.