Category: Personal and Business Loan News

What Kinds Of Small Business Financing Are Available?

small business loans

If you are starting a new business or expanding an existing one, you might need to get financing and get it fast. If that is the case, you need to carefully consider the kind of financing you choose as this could seriously affect your cash flow.

Before you apply for financing, you need to consider the following:

  • determine the amount of financing you need
  • get a solid business plan developed
  • consider the time frame that you will need for repaying the loan
  • determine what your ability is for repaying the loan

Tip: Consult with your business adviser or accountant to get professional advice to help ensure you make solid financial decisions for your business.

 

Types of financing

There are two major types of financing that are available for your business – equity finance and debt finance. First let’s look at equity finance.

Equity Financing

Equity finance is where either your own money is invested, or the funds come from other investors, usually in exchange for shares or equity in your business.

The major sources for equity finance are:

  • Personal finances – using your own funds from selling personal assets or personal savings to self-fund your business.
  • Venture capitalists – these are professional investors who invest large sums of money (as equity) into businesses with the goal of achieving for high profit and/or growth potential.
  • Friends or family – you may offer friends or family to become a business partner or offer them a share in your company in exchange for capital investment. You really need to be careful with this option since a breakdown in a business relationship might affect personal relationships as well.
  • Private investors – also referred to as business angels, they tend to be wealthy people who are prepared to invest money into a business in exchange for a share of profits and return on equity. These people are rare and hard to find.
  • Crowd funding – this involves a large group of individuals collectively raising capital, mainly through online crowdfunding or social media platforms. It enables investors to offer large amounts of money in exchange for equity shares or for a reward such as a first-run products or other business perks.
  • Crowd-sourced equity funding – this is a means for small businesses and start-ups to raise money via the public. Usually they rely on raising small amounts of money from many investors. Every investor may invest as much as $10,000 per year in a company, and in exchange receive shares.
  • Government – a majority of government assistance that is available for small businesses is in the form of low cost or free advisory services, guidance, or information. However, in certain circumstances you might be eligible to receive a grant, for exporting, innovation, research and development or business expansion.

 

Debt Financing

If you are unable to achieve any of the equity funding options listed above, then you are left with no option but debt finance. This is money that is borrowed from a bank or non-bank lender, or other types of external lender. It is actually not unusual for a business use a combinations of both debt and equity financing. The main debt finance sources are:

  • Financial institutions – this includes institutions such as building societies, credit unions, and banks. Financing may be provided in the form of a loan, line of credit, or overdrafts.
  • Retailers – buying goods for your business on store credit through a finance companies. Unfortunately, these options may require little to no upfront payment, but often have high interest rates. However, an interest free period is offered by some retailers but you must be disciplined in maintaining your cash flow to avoid having to pay any unnecessary interest.
  • Suppliers – when you have trade credit from suppliers it allows you to pay for goods at a later date. Not everyone has the ability to chose this option as it is really dependant on having a good relationship with the particular supplier. If you don’t have a track record, this makes this option almost impossible.
  • Peer-to-peer lenders – this type of service matches individuals with money who want to invest with individuals looking to borrow money. These loans usually need to be repaid within in a certain time frame. The interest rates can vary according to how much risk is involved.
  • Friends or family – might offer to loan you money. In order to avoid any misunderstandings it is very important to get a formal written agreement in place that specifies the loan terms, interest rate, and repayment requirements Seek legal advice on how to draw a loan agreement up.
  • Non-bank lenders – There are a number of online non-bank lenders to choose from that offer fast, simple and inexpensive finance options. LoanOne is one of the fastest growing financial companies in Australia who fall into this category. We offer both personal loans and business loans with competitive rates for different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. So if you’re stuck using traditional finance options, LoanOne can help you.

Fundamental Facts About Loans For Small Businesses

small business loans

As you go about selecting the right small business loans, it is wise to gather as much information as you can about the range of options that are available to you. Australia boasts a wide range of lenders that cater to small businesses, all of which offer various types of loan products. As such, prospective borrowers need to familiarize themselves with extensive information in order to make the best choice for their business. Therefore, this article is a comparatively brief summary of some of the key factors to consider when seeking a small business loan.

Preferred Method Of Accessing Loan Funds

One of the most crucial factors in selecting a specific type of small business loan will be the frequency and timing of when you want to access the proceeds of your loan. Borrowers who wish to obtain the entire loan amount upfront as a way to purchase business capital or expand the enterprise should pursue a “fully drawn advance.” Businesses needing a solution for temporary cash flow concerns should seek a loan that is structured as a line of credit or as overdraft protection.

Desired Loan Terms

A loan that is disbursed on an upfront basis will be repaid in installments comprised of a percentage of principal amount together with interest. The precise amount required at each interval will be determined by the stated term or duration of the loan. When choosing a small business loan, it is therefore necessary to make honest calculations about the size of installment payments you can comfortably make. While a longer loan term will mean lower repayments, the total cost of the loan including interest will be greater.

Collateral And Security

Small business loans that are secured tend to be somewhat less expensive, but the downside is that collateral will need to be pledged in order to obtain a more favorable rate. Security for a loan of this type could be in the form of business assets, personal property or alternative types of collateral. Though a secured loan product will carry a lower rate of interest, failure to pay in a timely fashion can result in the seizure of the pledged assets. This is why many small business owners are hesitant to pledge their own residence to get a loan in Australia.

Interest Rate Structures

Small business loan products in Australia will either have a fixed interest rate or a variable rate. As the name would suggest, a fixed rate is one that does not change during the life of the loan. A variable rate fluctuates along with the broader financial market. Lenders assume the risk of market changes for fixed rate loans, but in the case of a variable rate loan, the borrower bears the risk. Variable rate borrowers may ultimately pay less in interest during their loan terms, but there is always a chance that unexpected rate interests will make repayment difficult.

RELATED: How Can a Small Business Loan Benefit My Business

 

Lender Fees

Institutions offering loans to small businesses will have their own fee structures in place, and these may encompass application fees, fees for early repayment, establishment fees, maintenance fees and more. Though a particular some lenders may boast a low interest rate, it may be that their fee structure makes the loan more expensive than a product offered by a lender with a higher rate but fewer fees. The key is to make a careful calculation of the entire cost of a loan and the required monthly payments in order to avoid unpleasant surprises and hidden fees.

Documentation Required

Certain types of lending institutions in Australia, particularly banks, will want to receive highly specific business plans from those seeking a business loan. This documentation usually includes cash flow forecasts, financial history, profit and loss statements and the like. This can be time consuming and complicated making the situation a complete turn off.

Companies like LoanOne make the documentation process simple to follow. LoanOne is one of the fastest growing financial companies in Australia and are here to make the loan application process fast and easy. We offer both personal and business loans with competitive rates to different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. Apply now by clicking here.

Credit Cards Vs Personal Loans – What’s the Real Difference?

credit card vs personal loans

Credit cards or personal loans – the debate over the pros and cons of these two financing options still rages on. On the one hand, credit cards offer an easier and much more convenient means of borrowing. However, they tend to be more expensive and, therefore, their popularity is waning. On the other hand, personal loans are much cheaper, albeit they are a tad less flexible than credit cards. Nonetheless, generally, the best financing option depends on what you plan to spend the money on as well as the personal discipline you have when it comes to repaying.

On the whole, Australians like to spend. As a country, we have stacked up about $100 billion in debts emanating from personal loans and credit cards. Credit cards and personal loans make it easy to access cash when you don’t have any savings and they both offer different features that make them suitable for different circumstances. A good example is the structure of each product. Credit cards are structured in as a line of credit-style account which offers users regular access to smaller amounts of money as they need it. On the other hand, personal loans offer lump-sum access to money, usually meant for a particular reason.

Either way, one thing that can’t be avoided is the fees and penalties. As such, each of these loan options needs to be handled with caution.

According to the figures given by the Australian Prudential and Regulation Authority, in December 2012, personal loans had totalled about $58.6 billion while outstanding credit card bills totalled $40.8 billion. Furthermore, it has been openly published that financial services providers charged an average interest rate of 13% for personal loans and 17% for credit cards.

 

Counting The Cost

One of the reasons that personal loans are more attractive is that they have lower interest rates when compared to credit cards. Their repayment schedule also makes it easier for debtors to fully repay their loans, eventually. This means that in the long run, personal loans are cheaper. They also come with greater strictness in terms of repayment terms, which sees the loans cleared within the agreed time frame. Furthermore, with personal loans, the temptation to keep spending is lower due to the fact that very few loans offer to redraw options. With this in mind, personal loans are far better when making a one-off purchase such as furnishing a new house, financing home improvements projects or taking an overseas holiday.

On the other hand, the convenience that credit cards offer allow their users to spend immediately as needed. This is great when it comes to emergencies. Credit card users really need to consider whether they have the cash flow to make the repayments as soon as possible or whether you will likely keep spending, going further into debt.

When it comes to personal loans, LoanOne is there to help you. LoanOne is one of the fastest growing financial companies in Australia. We offer both personal and business loans with competitive rates across a broad array of industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. For fast approval please click here and apply now!

What is the Difference Between a Bank and a Non-bank Lender Business Loan?

small business loan

The small business sector is a critical component of the Australian economy as it employs about 50% of the national workforce and contributes nearly 380 billion US dollars to the country’s GDP. That is why this sector is often referred to as the ‘engine room’ of the economy.

And just like any other engine room out there, this sector needs enough fuel to keep it running and to also accelerate it. Despite being an important part of the economy, the growth of the small business sector is often hindered by poor access to capital.

This is what has contributed to most of the failures in this sector. Banks are often reluctant to lend to small businesses particularly when a small business owner does not have bricks and mortar security – especially if the business owner wants to borrow money short-term. Banks usually want borrowers to have a strong track record of meeting financial obligations.

However, most new business owners cannot demonstrate a good credit score as the business does not have an established credit history or proof of earnings. What’s more, a small business with a track record of paying its bills on time could have its loan application rejected if the owner’s personal history is not squeaky clean.

ALSO READ: An Introduction To Startup Business Loans

 

bank lender

To make matters worse, the bank loan approval process can take weeks. During this process, the borrower is required to fill out onerous forms and present a business plan stating how he or she will use the funds he or she is borrowing. The things we have just mentioned make it hard for small businesses to access the capital they need in order to capitalise on a golden opportunity or during tough trading periods.

The good news is that the emergence of credible non-bank lenders has given small businesses a much-needed lifeline, especially those businesses looking for short-term loans i.e. loans lasting a few months to a few years. The best thing about non-bank lenders is the fact that they can process a loan quickly, usually within 24 hours. This means that a small business owner can apply for a small business loan with little security and minimal paperwork and usually get the loan approved on the same day.

So, the big question is: when should a business owner borrow from a bank and when is it ideal for him or her to borrow from a non-bank lender? Borrowing from a bank can be ideal for a business owner of an established business with the necessary security such as residential property, commercial property and land as he or she will be able to get a lower interest loan. This is the case especially when the business owner’s loan plans are not time sensitive.

small business loan

On the other hand, borrowing from a non-bank lender can be ideal for a business owner who needs fast short-term finance but is not able to secure a loan from the bank because of a poor credit rating or little to no financial history.

Regardless of the type of lender you choose, it is important for the business owner to only borrow an amount in which they know they can comfortably service. A business owner should always be aware of the fact that defaulting on a loan can not only jeopardise the business but can also have a negative impact on the owner’s personal situation.

Conducting extensive research into the loan options available can help a business owner avoid making wrong decisions. This can help you determine the best non-bank lender to meet your needs. Choosing between a non-bank lender and a bank or even choosing to forego a loan altogether depends on the business’s financial situation and the needs of the business. After all, different engines need different kinds of fuel.

This is where LoanOne can help. LoanOne is a non-bank lender and is one of the fastest growing financial companies in Australia. We offer both personal and business loans with competitive rates to different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. Please click here to apply now!

An Introduction To Startup Business Loans

startup business loans

If you have a business idea and plan to start a company, then you will most likely be searching for financing options to get your startup launched. There are many different forms that a startup loan may come in. In this guide, we will be discussing the financing options available for startups to help you narrow your search down and find the best business loan for you.

 

3 Most Important Things That You Need To Be Aware Of About Startup Loans

1. What is a “startup”?

Firstly, what is startup? A startup is a new, rapidly-growing business that is still in the process of developing its service or product. This type of company can be an organisation, partnership, or sole trader which all have models that may be scaled rapidly. A startup is not technically a business, but is a stage of development for a business.

2. Common funding needs of startups

Funding for development. Startups may have high growth periods, but still require funding. For example, this could be for developing a new service or product. This is one of the more common needs that startups have for funding. It can be expensive to develop an initial business into a service or product that is ready for the market and is done during the time when startups haven’t made any money yet.

Funding for operational expenses. Just like any business, startups need to pay the salaries of founders and staff, leasing/rental of business space, and for hiring staff. The more staff that is hired and the bigger the business is, the more funds that will be needed by the startup.

Marketing a product. Trying to obtain customers can be quite challenging for a startup, and it can only be achieved through effective marketing. Whether it is through the use of social media, online marketing or old-fashioned letter drop, those activities cost money and time.

3. To expand a business

For any startup, it is a positive step in the right direction to expand the business. External funds are often needed to expand due to the startup having irregular cash flow.

RELATED: How To Apply And Qualify For A Business Loan

 

What kinds of financing are available for startups?

Startup Loans

Startups have little to no internal funds – or profit in other words. As a result, there are only two major types of financing that are available to them: equity financing or debt financing. With debt financing, money is borrowed and the business takes debt on. With equity financing, the business obtains funds from a public float or from investors in return for shares in the company.

The following are some of the equity and debt finance options that are available to startups.

Debt financing:

Loan from a traditional lender

Credit unions and banks offer loans to individuals wanting to start a small business. Usually the application process requires a detailed business plan and you might need to put up security as well.

Loan from an alternative or online business lender

Over the last couple of years, the number of alternative and online business lenders has continued to increase. It is now possible to apply online for a business loan and to receive funding very fast, sometimes within a 24 hour period.

Credit cards

If all you need is access to a line of credit or small loan then you might want to consider applying for a credit card. You can choose to apply for a card that provides you with 0% p.a. for up to 12 months on purchases.

Equity financing:

Angel investors

They are individuals who provide your startup with financing, usually in exchange for receiving a partnership stake in your company. These individuals can be found in investment groups, meetups, startup hubs, or through your own research.

Venture capitalists

This specific kind of equity capital involves venture capital firms or individuals who provide the funds for early stage businesses and startups. Your business must demonstrate a solid business strategy and potential revenue.

Public float

You obtain this type of financing by listing your business on the stock exchange so that individuals can buy shares. Remember that this will require you to have a high level of transparency for your business compared to if you were to remain being a private company.

 

How can startup loans be compared?

It is very important to find the right type of finance for your startup. It all begins by comparing the various options that are available to you. Here are a few important things to consider:

How much money do I need to borrow?

The loans that you will be offered will be based on the specific details that you provide on your loan application. However, you might be able to know what the minimum and maximum amounts are being offered by the lender. That is more likely with credit cards as well as alternative and online lenders.

How long will I have to repay my loan?

If your business still hasn’t gotten off the ground, then it can be hard to know how much you will be able to afford to repay on your loan. This is where a sound business plan can help. Work out an approximately budget and don’t apply for any loans you are unable to afford.

Will I need access to a lump sum amount or ongoing credit?

Are you going to need to have continuous access to financing? Determine whether having a loan with a redraw or an ongoing credit line is the best option for you. Make sure your repayments are taken into account when making a budget for your startup financial if you decide to go with the lump sum loan.

LoanOne is one of the fastest growing financial companies in Australia. We offer business loans for startups with competitive rates for different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. Click here to apply now!

5 Tips For Getting A Personal Loan Approved

personal loans

The reasons for getting a personal loan are varied and many. You might want to consolidate your debt, purchase a car, get married or even go on holiday. Whatever it is you’re trying to achieve, a personal loan is a good financing option if you don’t have savings or other financing options.

Following are some tips that you can use to improve the chances of getting your personal approved.

 

1. Ensure You Meet The Basic Criteria

Regardless of the reasons that you want the personal loan for, you will need to meet these minimum conditions.

  • You must be at least 18 years of age
  • You must reside in Australia
  • You must meet the minimum income requirements
  • You must be gainfully employed
  • You must have Australian or New Zealand citizenship, or an eligible Australian visa, or have an Australian permanent residency.
  • You should not be going through the bankruptcy process
  • You should have a good credit rating

 

2. Apply For The Right Amount

Loan One’s personal loans are designed to help clients with a short-term need and not burden them with long-term debt. With this in mind, you can use our borrowing calculator to give you an idea of how much you can borrow based upon your income level and lifestyle. If your income is not sufficient enough to support the payment requirements, we will not approve your loan application.

That being said, you can opt to reduce the amount of money you are seeking and/or extend the loan terms, thereby reducing the impact that the loan repayment will have on your current cash flow.

 

3. Build A Stellar Account History

For customers who have an account with us, we have a pretty good idea of your financial situation. It is therefore important to manage your finances effectively, which shows us that you are able to handle a personal loan effectively. For instance, customers who receive their salaries in their accounts, pay their bills, and importantly put aside some personal savings, show that they know how to budget and manage their finances properly.

Additionally, it is important to never overdraw your accounts. If you avoid overdrawing your account, you will avoid fees and will create a good account history. This will demonstrate that you have the ability to manage the finances you have effectively.

 

4. Maintain A Stellar Credit Rating

Making electricity and phone bill payments on time can contribute to a good credit rating. On the other hand, having arrears, missed payments, and other debt collection activities recorded on your credit records by credit reporting bodies can negatively impact your rating.

It is important to keep in mind that making numerous applications for credit products and/or loans with numerous lenders can negatively influence your chances of getting a loan approval.

 

5. Develop A Good Savings Record

You can also demonstrate that you are a financially responsible individual by contributing regularly to your savings account. By setting aside a certain amount of money as your savings every week or every month, you show that you are likely to meet the regular loan repayments that are characteristic of personal loans.

 

Ready to apply?

When you are ready to apply for a loan, you can apply online. If you are a LoanOne customer, it should take you no more than 10 minutes. You simply apply and receive the funds same day in most cases. LoanOne is one of the fastest growing financial companies in Australia. We offer both personal and business loans with competitive rates for different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. Please click to apply now!

Fast Business Loans: What are they used for?

fast business loans

Just about every business has a different outlook about loans and financing. While a loan could be considered a risk for just about any business, sometimes you have no choice but to take the risk. If businesses use loans for the right reasons and at the right time, it can actually help to take your business to a whole new level, making the risk worthwhile.

 

Top Reasons for Business Loan

Taking this into account, let’s take a look at some of the most common reasons for business loans:

Acquiring More Space or developing a Secondary Site

Your current business might have outgrown its original office, shop or site. Your current location could be working well, but it might be time you moved to a new place. This isn’t necessarily a bad problem to have, but it can cost money. This is where a fast business loan can help out.

Reasons for Business Loan

Boosting Your Credit Record

If you are applying for finance for the first time, and you maintain a good credit record by paying on time and keeping your account up to date, this boosts your chances of acquiring further finance in the future. You never know when you might need funds in the future!

Acquiring New Inventory or Specialist Equipment

Almost every business will require new equipment or an equipment upgrade at some point in time. Whether you are a services business or a manufacturer, its a fact of life that your equipment will need upgrading due to wear and tear, or even advances in technology. Furthermore, you may need to expand your inventory to keep up with new trends or demand. This is where business loans are critical to your business.

Taking advantage of new opportunities

So often in business, a new opportunity will present itself. This may come as a result of identifying a gap in the market, or you may form a new business relationship that requires you to act fast. When opportunity knocks, a fast business loan can open the door.

Hire Better or New Staff

Many business owners know that your workforce is your greatest asset. And it is not easy to retain or find good employees. You should not lose your greatest asset simply because you are not in a position to keep them. You could be letting a considerable investment walk out of the door. This is where a business loan can also help.

Cash flow

Sometimes, it is not low profit margins that stifle your business operations. It can be something as simple as lack of cash flow that can cause a small business to collapse. If insufficient cash flow is hampering your business operations, then a fast business loan could be the best way to cover this shortfall.

 

Where Should You Apply For Small Business Loans?

fast business loans what are they used for

 

Until recently, the conventional sources of business loans were the big banks. Unfortunately, banks have proven to be slow, complicated to deal with, and bureaucratic, particularly for the small business. From a recent survey, it was found that it could take close to three weeks for a bank to approve your loan application, with more than 80% of the applications being rejected. Now there are many non-bank lenders that allow you to apply online and can approve your loan application in less than 24 hours. The application process is quick and easy.

ALSO READ: How To Apply And Qualify For A Business Loan

New Lending Products Are Making It Easier

Most small businesses find it very difficult when it comes to acquiring working capital. As a result of this, various lending solutions have exploded in the marketplace. These lenders and their products provide you with a simple, no fuss online application procedure. They quickly assess all your business data and can even approve your application and have the money in your account within 24 hours. This provides you with immediate access to the funds that may mean the difference between the survival or extinction of your business.

Other considerations

There are numerous online lending options you can consider. However, you need to be cautious as the wrong financing could cost you dearly. If the loan exceeds your needs or repayments are structured poorly, it could be catastrophic for your business. The following needs to also be considered:

1. The importance of interest rates

Pricing and costs are an essential aspect that you need to take into account your loan. Always be on the lookout for lenders who do not mention their rates or give pricing that is difficult to understand. Go for a simple, straightforward agreement that indicates the interest rate and other fees and charges.

2. A speedy platform that’s ideal for your business

When applying for a fast business loan, go for a platform that will automatically review all your business data and provide you with a real-time decision. While traditional lenders will use online forms to get your details, the information will still undergo a manual process. You might need to wait for weeks to get feedback. You need to look for an online lender who utilizes smart technology to quickly arrive at a decision so you don’t have to worry about long approval times. Look for lenders who can approve your loan application online.

LoanOne is one such online lender. LoanOne is one of the fastest growing financial companies in Australia. We offer both personal and business loans with competitive rates for different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs. Click here to apply now!

Personal Loans With Bad Credit

personal loan with bad credit

When it comes to your credit history, there is a lot of speculation around how this applies to a personal loan application. The question always remains, how crucial is your credit history when you are applying for a personal loan?

The definition of a personal loan is when a financier gives you money for personal use. While they are not limited to a single area, these loans could be used for various reasons. There are also multiple types of personal loans available, and your credit rating plays a crucial role in the kind of loans you have access to, as well as which ones you will be approved for. Most personal loans require that you have an excellent credit history. A negative, or poor credit score, can adversely affect your loan limit.

 

How Personal Loans Work

Personal loans work similar to other loan types. The lender will give you a specific amount of money so that you can use that money to pay for an unexpected expense or for other purposes. The lender will determine the amount you can borrow as well as the terms of your loan, such as the interest rate. You are then required to pay back your loan in installments plus the accrued interest.

Personal loans are primarily available from credit unions, lenders, and banks. They can be literally used for anything from going on vacation or buying a car, through to settling your bills. Once you take a personal loan, it is mandatory that you make repayments accordingly. Typically, repayments are usually on a monthly basis, but in some instances, it could be fortnightly or weekly. The amount to be repaid is composed of the principal (the initial amount you borrowed) as well as the interest accrued on this original amount.

For more information regarding how they can assist you, you need to fill the form below.

 

How Credit Affects Your Ability To Get Personal Loans

Your credit file has a significant effect on your ability to secure a personal loan. Before a lender can approve your personal loan application, one of the things they need to do first is to check your credit file. The lender will scrutinize your record and look for any warning signs or bad marks like bankruptcy, loan defaults or late repayments. Your credit history is one parameter that lenders use to assess your ability to pay your loan depending on your past credit. Your credit history shows your capacity to make repayments successfully as well as your previous dealings with credit. If you have negative marks and bad credit history on file, you will be limited regarding your personal loan access options which could even result in the rejection of your application. While you might still get approved for a personal loan even with a bad credit history, it will not be straightforward.

 

Personal Loan Options For People With Bad Credit Scores

If your credit score is weak, there are still options at your disposal to acquire personal loans.

Debt Consolidation Loans: If lousy credit has hit you, the best way to go is to consolidate your debts into a single loan. This leads to the better management of your loan repayments and when done well, it could even lower your fees and interest.

Payday Loans: These loans provide you with some little money (up to $2,000) over a small period. Payday lenders are usually flexible in their loan application criteria and will approve your loan application even with a bad credit history. Unfortunately, payday lenders typically have higher charges.

Secured Loans: With this loan option, your asset is used as collateral. These loans are popular for people who have poor credit scores, and you are more likely to have a successful application when you apply for this loan. The reason for this is because your bank has security for your loan, thus more or less making your credit history irrelevant as part of the application.

Bad Credit Lenders: Normally, bad credit lenders are usually more flexible with their loan application criteria. Their specialty is in lending to people with bad credit histories hence making them a good option for anyone with bad credit.

 

Improving Your Likelihood of Your Application Being Approved

personal loan

Luckily, there are a few ways in which you can improve your credit score and consequently improve the chances of your personal loan being approved.

Frequently check your credit file. Requesting for your credit file and checking it regularly is the best way to monitor your credit as well as pinpoint any possible errors. This could, in turn, boost your chances of getting approved for a personal loan.

Pay your bills on time. Late payment of your bills has a direct impact on your credit file. An excellent way to improve your chances of getting approved is ensuring you pay your bills on time so you can maintain a good credit rating.

Consolidate your debts. When you consolidate your debts into one the chances of your personal loan application being approved are increased considerably. Combining your debt and having your debt situation under control will reflect positively on your credit file.

Credit Repair. You might also consider repairing your credit. Credit repair specialists will look into your credit files, isolate the errors and then have them deleted from the credit file. Your bad credit rating could be as a result of a mistake from your lender, and this could be corrected through credit repair. There are fees usually involved in this process.

Control your spending and credit cards. A majority of individuals fall into credit trouble by using credit cards. To boost your chances of getting an approval, you will need to control your spending, make your credit card payments on time and spend only within your means.

 

Types of Personal Loans

Secured Loans. These loans need you to use an asset as collateral. When you do not make your repayments entirely, the lender can take over the asset. These loans are usually more secure and have lower interest rates. They could be a good option for anyone with a poor credit rating.

Unsecured Loans. With unsecured loans, you don’t have to use an asset as collateral. This type of loan is usually a higher risk to borrowers and thus often has a high-interest rate. You will need a good credit history for you to be eligible for this loan type.

Fixed Loans. Fixed loans are often very secure. The interest rate is usually locked in for a specific term between 1 to 5 years. During the set time, interest rates and repayments do not change. However, these loans do not have many features. Fixed loans could be the best option for anyone who has previously had trouble with repayments since it allows for budgeting.

Variable Loans. With this loan option, the interest rate usually varies with the interest rate announcements. They often have lower interest rates, but you should always be ready for an increase in the interest rate. These loans usually also have numerous features.

Car Loans. These loans are financing options which are specifically meant for buying a car. They provide you with the capital to buy a car and could either be unsecured or secured, often using another vehicle as collateral. There are several car loan options for people with a poor credit score.

Payday Loans. These loans are smaller and usually, have a shorter term. Their turnaround times are generally fast, and you could receive funding in less than 24 hours, hence the name payday loans. You can get up to $2,000, but you should be aware of the high-interest rates and only choose them in the case of an emergency.

Debt Consolidation Loans. These types of loans let you consolidate your debts into a single loan. It enables you to be in full control of your debts and often have lower interest rates.

With bad credit, you will realise that it will not be easy to apply for a personal loan. However, there are various steps you could take to gradually improve your position so that you will be a favourable borrower. Diligence and patience are crucial if you want your financial life back in good shape so that you have numerous personal loan options.

6 Inside Secrets On How To Get Your Personal Loan Approved

personal loan

When applying for personal loans, every single detail is carefully assessed, even your postcode.

This does not mean you should be spending hours agonising over an application. However, here is some information to help with your loan application so you can get your “stamp of approval.”

1. Do You Match The Eligibility Criteria?

To begin with, you have to be eligible when it comes to applying for personal loans. You will need to:

  • Be a minimum of 18 years old
  • A permanent Australian resident
  • Currently be earning a gross annual income that exceeds $24,000
  • Have no defaults when it comes to credit cards or loans you have had in the past 5 years
  • You have not been declared bankrupt in the last 7 years

 

2. What Does Your Previous Lending History Show About You?

Your lending history will be thoroughly reviewed when you apply for your personal loan. However, loans that do not have something held as security or collateral by a lender or, unsecured loans, are scrutinised the most.If you have previously maintained regular payments in the past, this is considered favourably when it comes to credit cards and personal loans.

There is actually no way around this, so the ideal thing to do includes always making your repayments on time, so your credit history remains clean. You should also check on your current credit score, to find out the state of your credit history.

ALSO READGuide to taking out a Personal Loans

 

3. Can The Lenders Bank On Getting The Money Back From You?

The lenders usually determine your risk level by reviewing your liabilities and assets. You can gain a basic idea on your actual net worth when using this calculation:

Assets, which is anything that you own, (subtract) less payments that are owed to someone else, or debts = Net Worth

If you have liabilities which are more than your current assets, the responsible lenders will usually not increase these liabilities with new debt.

Top TipWhen you calculate your liabilities, ensure you are only including your portion for your debts. For example, if you have a home loan which is shared with your partner, then only list the amount of your share for this loan, opposed to the entire amount. You can also include your savings under your assets as well as any that are in term deposits.

 

4. Are You Regarded As Stable?

Address and employment are 2 ways in which lenders will assess your stability. If you are no longer on probation and you have been with the same employer for over 3 years and you have lived in the same residence for more than 2 years, you are viewed more favourably.

This is not always realistic for everybody, so here are a few things that you are able to do:

  • Self Employed. Show you business activity statements or your tax return for the last year as the benchmark that will indicate your earnings annually.
  • Commission Salary. If you have commissions that are paid annually, ask your employer for a letter that outlines your expected commission and salary.
  • Apprenticeship. If you are close to the end of an apprenticeship and they are keeping you on full-time then ask your employer for a letter to confirm these details.

Residential stability may be challenging when you are still living with your mom, dad or both or you happen to move around often. It works in your favour when you own your own home, or you are able to show a lease that is signed for 6 to 12 months.

 

5. Are You Able To Afford The Loan Repayments?

refinance

The lender needs to know whether you can afford your loan repayments comfortably. This is when they assess your expenses and income to ensure that you have what is known as “excess capacity” which means your income has been determined as higher in comparison to your expenses.

They also want to know if you have a buffer for life events that are unexpected such as when you have a baby or an increase in bills that will not strain your finances. The lenders might also utilize industry benchmarks like the HPI (Henderson Poverty Index) and the HEM (Household Expense Measurement) as the baseline when they assess your application.

Top Tip: Similar to liabilities and assets, ensure you only list your actual expenses, like your portion of groceries or rent, and not the entire households.

 

6. Your Life Stage And Age May Also Have An Influence

Your life stage along with your age also plays a role. For example, if you are 21, your age is not the issue, but it is more than likely that you have not yet built-up employment and residential stability, a high income or an asset position that is strong. Similar to lending history, there is no way you can get around this, so make sure you satisfy other factors that have been mentioned above.

What should you have prepared when applying for a loan?

  • Proof of identification
  • Proof of your address such as a bank loan, rental agreement or utility statement
  • Tax returns, payslips or your business-activity statements
  • An employer’s letter
  • Bank account
  • Rental agreement

Dependent on what you need the loan for, when the full amount has not been approved, do not immediately reject the lesser amount. The small loans can still assist when you are interested in debt consolidation.

If you are approved for a loan of $10,000, how would you like to use it? Will the money go towards consolidating your debt, a holiday or to revamp one of the rooms in your home? Feel free to comment below.

The Pros and Cons of Debt Consolidation

debt consolidation

Is debt consolidation the best move for you? Getting to know the pros and cons may help you to make a better and more informed decision.

An unfortunate fact of life is that personal debt can increase to uncontrollable levels in a short amount of time. One of the best ways of tackling debt is by consolidating your debts into a personal loan. Here are a few things you should consider when applying for such a loan facility.

 

What Is Debt Consolidation?

If you are drowning in debt or are having difficulties paying multiple loans, with each loan having individual interest rates, balances, terms and conditions – it may be prudent for you to consider combining all these debts into one convenient and easy to manage loan. This loan will only require you to make one single monthly loan payment.

debt consolidation by personal loan

However, there are some things you should consider before making a final decision. Here are some pros and cons of debt consolidation that can help make your decision making process easier.

Pros:

One Payment, Instead of Multiple Payments

When you take on a personal loan to consolidate all your credit card debts, plus their respective interest charges, you will only have to make a single payment every week or month over an agreed duration of time. Managing all your credit card debts thus becomes a lot easier and much more convenient.

Fixed Rates and Terms

A personal loan features fixed rates and terms that make sure you stay disciplined and diligent in paying off your debt. However, it is recommended that you only commit to loan terms and conditions that you can meet or you may risk damaging your credit score.

Lower Monthly Payments

Increasing the amount of time you have to pay your debts means you will be required to set aside less money every month towards debt repayment. Lower monthly payments however means that you may end up paying more in the end.

 

Cons

Like any other loan, there are certain downsides. Here are some of the drawbacks of using a personal loan to consolidate your debt:

Potential To Increase Your Debt

By consolidating your debt, you are able to free up credit. However, if don’t do this, you may end up spending more on your loan and thus increase the amount of money you owed to begin with.

Spending More

As highlighted above, a personal loan can help you lower your monthly payments by stretching the repayment duration. However, the stretched repayment period means you end up paying more interest and thus spend more money to repay your debts.

Damaging Your Credit Score

If you fail to be consistent with the monthly payments on your personal loan, you may end up damaging your credit score or even worse, losing it altogether. This can lead to serious financial turmoil.

 

What Should You Do Before Applying For A Personal Loan For Debt Consolidation

get out of debt

1. Shop around and compare the rates and terms of different loan facilities in order to find one that suits you best.

2. Come up with a convenient and practical repayment plan that allows you to make loan payments easily and still cater to your personal and living expenses.

3. Calculate a reasonable repayment term that works best for you so that you do not increase interest rates or increase the risk of paying late fees.

4. Knowing your credit score is instrumental in securing a personal loan.

Taking control of your debt situation as soon as it starts getting out of hand is the best way to secure your financial future and your ability to get future loans, such as a home or car loan.

You can learn more about LoanOne Personal Loans for debt consolidation here. You can apply online now and get a response within minutes.