Four types of personal loans.

Used wisely, personal loans can be a handy tool to help you tick some item off your bucket list – from furnishing a new home to buying a car, paying for a wedding or purchasing items for the arrival of your new baby.

The key is to shop around for a personal loan that combines a low rate with flexible features – and some personal loans are definitely more flexible than others.

Defence Bank personal loans let you choose your own term – from one to seven years, which helps you shape the repayments to suit your budget.

Better still, with a Defence Bank personal loan, you can make fee-free extra repayments to help clear the balance sooner and save on interest charges – and there is no penalty fee if you pay off your loan ahead of schedule. If you’re short of cash, any extra payments you’ve made on your Defence Bank personal loan can be accessed through redraw.

Which personal loan suits you?

We test-drive the four main types of personal loans to help you decide the option best suited to your goals.

Secured personal loans.

A key factor that can shape the interest rate you pay on a personal loan is whether or not you provide security (also known as collateral) for the loan.

The idea behind a secured loan is that the lender can claim possession of the asset offered for security if you can’t (or don’t) keep up the repayments. This reduces the lender’s risk of losing money, and the reward for you as a borrower is a lower interest rate.

Personal loans for new cars are an example of a secured personal loan. The car acts as security, helping you save with a lower rate.

Unsecured personal loans.

There are times when you need a personal loan to pay for purchases that can’t really be offered up as security – like a loan that’s used to fund an amazing holiday. That’s when an unsecured personal loan can be a budget-friendly option. And with the upfront funds you need for your trip, you can book and pay for accommodation, tours and attractions to pocket early payment discounts that help you save money.

Debt consolidation loans.

Not all lenders offer debt consolidation loans, but they can be a useful option if you’re juggling multiple debts.

A Defence Bank debt consolidation loan can help you streamline money matters. Instead of managing a number of different debts – maybe a few credit cards, store cards or a couple of buy now, pay later accounts, a debt consolidation loan lets you focus on just one loan. It can save you time and money, and help you manage your finances more effectively.

With no fees for extra repayments or early payouts, a Defence Bank debt consolidation loan can get you back on track faster.

Payday loans.

Payday loans are also known as salary loans or small dollar loans because they are available for amounts up to $2,0001. Despite their small size, these loans can come with a big cost.

As a guide, payday lenders can charge a loan establishment fee of up to 20% of the amount you borrow2. So if you take out a payday loan for $2,000, the establishment fee can be $400.

In addition, you can be asked to pay a monthly fee of 4% of the amount borrowed3. On a $2,000 loan repaid over 12 months, this fee can add up to $960. So, between the establishment fee and monthly charges, a loan of $2,000 could see you repay a total of $3,360 – including $1,360 in fees4. That’s the equivalent of an interest rate of 68%!

This explains why payday loans should be treated with caution. A small loan can blow out to a significant cost, and it can be worth exploring other options before committing to a payday loan.

Need help finding the personal loan that’s right for your needs? Talk to the team at Australia’s Defence Bank. Call our Contact Centre on 1800 033 139, or visit your local branch to find out more.

Have any questions? We have the answers. See our FAQs.




Important note: This information is of a general nature and is not intended to be relied on by you as advice in any particular matter. You should contact us at Defence Bank to discuss how this information may apply to your circumstances.

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