The Alex Bank guide to personal loans

3 March 2022

At Alex Bank, we think there is a lot to love about personal loans!  Our guide provides information around how personal loans work, what they can be used for and how they could help you save money, plus plenty of tips on how to choose a personal loan that’s right for you.

What’s on your wish list? Lazing on a tropical beach? Maybe your kitchen has seen better days and needs an upgrade? Or perhaps it’s time to upgrade your car from old banger to sleek street machine.

No matter what’s on your bucket list, a personal loan could help you tick off the goals.

How do personal loans work?

A personal loan lets you borrow a set amount of money, to be repaid over a fixed term, usually around six months to five years. You can normally choose to make repayments weekly, fortnightly or monthly, so it’s easy to match payment dates with pay days.

Better still, the loan interest can be fixed, so you can have the confidence that your repayments stay the same during the life of the loan, making budgeting a breeze. Then, when you reach the end of the loan term, there’s no more to pay. It’s that simple.

Why use a personal loan?

Personal loans have a lot going for them. Check out some of the main reasons why personal loans can hold plenty of appeal for some consumers.

They’re flexible
Personal loans can be used for a variety of purposes including some you may not have thought of. This can include paying school fees, funding renovations, buying tech gear to set up a home office, or to consolidate debt and streamline your finances.

The cost is clear
Just add up the amount you borrow plus interest charges, and you can see at a glance exactly what a personal loan will cost you in total. Note that some lenders may include extra fees and charges such account set up costs and early exit fees that you’ll need to account when calculating the total cost of the loan.

Fun Alex Bank fact! We keep things simple and don’t charge our customers any account set up fees, ongoing monthly fees or early repayment fees.

You’re paying interest over a shorter set period of time
The term of a personal loan can be matched to suit your budget. And because personal loans only last a few years, it can help you to have a set goal around your repayment timeframe so you’re not dragging out the interest chain indefinitely.

That’s where a personal loan can deliver valuable savings. Depending on your individual circumstances, the overall interest paid on a personal loan could be a lot cheaper than folding purchases into an existing home loan*, which could see the repayments – and interest charges – extend over many years, and potentially cost a lot more in the long run.

For example, financing a small $30,000 kitchen renovation, and deciding to pay it off over a 25-year mortgage at 2.5% p.a. could cost almost four times more in interest than paying off the same debt over a shorter 3-year fixed term with an unsecured personal loan at a rate of 5.45% p.a.

Having said that, there could be other benefits from exploring options such as topping up or refinancing an existing Home Loan, such as access to a higher loan amount, if funding a larger renovation; or if you are paying off your home loan over a shorter period of time a lower up-front interest rate may be more appealing to you. However, refinancing can also come with other fees and charges to consider and factor into the overall costs.

There’s a set end date
The fixed term of a personal loan can give you a clear date for when the loan is fully paid off. This not only caps the total interest you’ll pay, it also lets you know when the repayments come to an end. So, you can start to readjust your budget as the loan races towards the finish line.

You may not need security
An unsecured personal loan lets you make big ticket purchases without the need to stump up security like a home or other property, making unsecured personal loans readily available to more Australians. Because there is no security behind the loan, interest rates for some unsecured personal loans may be higher than that of a secured personal loan.

Personal loans can help you save money
Like to save on power bills by making some eco-friendly home improvements? No problem, a personal loan can help you get there.

A personal loan can also be a money saver when it comes to debt consolidation. By folding multiple debts from products such as credit cards into a personal loan, you only have to manage one regular repayment, often with the savings of a lower overall interest rate.

How do I choose a personal loan?

It’s important to have the personal loan that’s right fit for your needs. With plenty of loans to choose from in the market, how do you narrow down the choice? Simple. Use our 4-point checklist to find a loan that offers value, flexibility and an easy application process.

Shop around for a low rate
The lower the interest rate, the less you’ll pay in interest for your personal loan. And when it comes to rates, there are big differences between lenders.

The interest rate you may receive could also depend on things like your level of income, expenses and credit score.

Choosing a well-known bank doesn’t always mean paying a low interest rate. In fact, some of the biggest banks can charge high rates for unsecured personal loans – in some cases, more than double what you may pay with an unsecured personal loan from other lenders.

The bottom line is, do your homework and consider looking beyond your regular bank for a personal loan. Chances are you could get a better deal elsewhere.

Check for hidden fees
Scratch the surface of a personal loan and you could find it’s loaded with a variety of fees. These fees can really bump up the cost of your loan.

At Alex Bank we keep things simple (and affordable) with:
  • $0 establishment fees;
  • $0 monthly account fees;
  • $0 early repayment fees; and
  • $0 late payment fees.

Ask about extra repayments
Here’s a quick tip. When you’re in the market for a personal loan, ask about whether you can make extra repayments at no extra cost. It’s definitely a feature worth looking for.

There can be times when you’ve got a bit of spare cash, and having the freedom to pay more off your loan can help you clear the slate sooner and may also save on interest.

The catch, that many people don’t realise, is that some banks charge a fee when you pay off a personal loan early. This can outweigh the interest saving of additional repayments, so be sure to check the fine print.

With Alex Bank, you can make as many extra repayments on your unsecured personal loan as you like, with no fees to pay out your balance early.

Look for a quick loan approval process
We’re in the 21st century, right? This should eliminate the need to fill out reams of paperwork, without having to wait for days to know if your loan is approved.

A quick application and approval process offers more than convenience. It can also help you save money. Getting prompt access to loan funds can mean nabbing early bird specials on a vacation, clinching a great deal on your next car, or pocketing early payment discounts for school fees.

At Alex Bank we’ve scrapped the traditional mountain of paperwork (trees love us for it!). Our entire unsecured personal loan application process is paperless, and we aim to approve applications in just one business day, with the cash in your account in as little as one day after approval.

That’s less time than it takes to pack a suitcase and tell the boss when you’ll be back from vacation.

Start achieving your goals

Stop dreaming about your wish list. Start ticking it off with a personal loan.

To get the ball rolling, chat with our team, email us at hello@alex.bank or phone us on 1300 738 453.

Content brought to you by Alex Bank

Important Information

*Illustrative example based on interest cost comparison on a $30,000 mortgage extension at 2.5% p.a over a 25-year term versus an unsecured personal loan at 5.45% p.a over a fixed 3-year term, excluding additional fees and costs. Note that different interest rates and repayment times may have different outcomes depending on an individual’s circumstances.

The content on this page is general information only, it is not intended to be advice or a substitute for professional financial advice. It does not take into account your situation, needs or objectives, you need to consider whether it’s appropriate for your situation and if you should consult professional advice. You should assess whether an Alex Bank personal loan is the best product based on your needs and situation and read the fine print, terms and conditions and compare different personal loan products on the market or seek professional advice.

Applications for finance are subject to Alex’s normal credit approval. Terms, conditions, fees and charges apply. Alex Bank Pty Ltd ABN 13 627 244 848 (“Alex”) is operating under a time limited and restricted Banking Authority. Further detail is available at www.alex.bank/legal.