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Should you use a personal loan?

Posted on April 18, 2018 by admin

A personal loan can come in handy if you need some extra cash to fund a purchase, but it may not always be your best option.

Before you sign away, you will need to understand how personal loans work and if they are appropriate for your circumstances.

A personal loan is when a person borrows a set amount of money over a time period, along with interest, fees and charges from a credit provider.

There are generally two types of loans: secured and unsecured. Secured loans are secured by an asset, i.e., a car or home, in the case you would default on the loan. These loans have lower interest rates as the asset could be sold if you cannot repay the loan.

Unsecured loans, on the other hand, are not secured by an asset and therefore generate higher interest rates. A credit provider has the ability to take you to court if you cannot repay the loan.

One of the first things you should check when deciding on a loan is the interest rate. You can calculate how much interest you will pay over the lifetime of the loan by multiplying the annual interest rate by the term of the loan. For example, if you are borrowing $5,000 with an annual interest of 3 per cent over 2 years, you would pay $300 in interest in total.

Another important consideration is fees and charges as these can vary substantially between credit providers. The fees and charges will depend on the amount of money borrowed.
If you plan on making additional payments, you should also check to see if there are any extra fees for doing so.

Before you commit to a loan, shop around for the best deal, ensure that you have read and understood the terms and conditions, and are confident you can make the repayments.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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