Understanding Personal Loans: A Comprehensive Guide by Fairgo Finance

Fairgo Finance is a leading financial service provider in Australia that is dedicated to providing financial assistance to everyday Australians. Their mission is to help individuals and families achieve their financial goals and improve their overall financial wellness. Personal loans are an important financial tool that can help people achieve their goals, whether it’s paying off debt, financing a home renovation, or covering unexpected expenses. However, it’s essential to understand the different types of personal loans, how to apply for them, and the associated fees and repayment options to make informed decisions and avoid financial stress. In this article, we’ll provide a comprehensive guide to understanding personal loans to help readers make informed decisions and achieve financial wellness.

Types of Personal Loans

There are several different types of personal loans available, each with their own advantages and disadvantages. Here are some of the most common types of personal loans:

  1. Secured Personal Loans: These loans require collateral, such as a car or home, to secure the loan. This can make it easier to obtain a loan and may result in lower interest rates. However, if the borrower is unable to repay the loan, the lender may repossess the collateral.
  2. Unsecured Personal Loans: These loans do not require collateral, but they may have higher interest rates and stricter eligibility requirements. Unsecured personal loans are typically best for smaller loan amounts and shorter repayment terms.
  3. Fixed Rate Personal Loans: These loans have a fixed interest rate that remains the same for the entire repayment term. This can make it easier to budget for repayments and avoid surprises. However, if interest rates drop, the borrower may end up paying more than they would with a variable rate loan.
  4. Variable Rate Personal Loans: These loans have an interest rate that can fluctuate over time based on market conditions. This can be beneficial if interest rates drop, as the borrower may end up paying less interest. However, if interest rates rise, the borrower may end up paying more than they would with a fixed rate loan.

When considering which type of personal loan to choose, it’s important to weigh the pros and cons of each option based on individual needs and financial situation. For example, someone who needs a larger loan may benefit from a secured loan with lower interest rates, while someone who only needs a small loan may opt for an unsecured loan with a shorter repayment term. Similarly, someone who values predictability and wants to avoid interest rate fluctuations may choose a fixed rate loan, while someone who is comfortable with risk and wants the potential for lower interest rates may choose a variable rate loan.

How to Apply for a Personal Loan

The process of applying for a personal loan typically involves the following steps:

  1. Check eligibility: Before applying for a loan, it’s important to check the eligibility criteria of the lender. This can include factors such as age, income, credit score, and employment status.
  2. Gather documents: The lender will typically require certain documents to verify identity, income, and creditworthiness. This can include government-issued identification, pay stubs or tax returns, bank statements, and credit reports.
  3. Shop around for lenders: It’s important to shop around and compare loan offers from multiple lenders to find the best interest rates and terms.
  4. Submit application: Once a lender is chosen, the borrower will typically fill out an application with personal and financial information. This can often be done online.
  5. Wait for approval: The lender will review the application and documentation to determine eligibility and loan terms. This can take anywhere from a few hours to a few days.
  6. Receive funds: If approved, the borrower will receive the loan funds either through a check or direct deposit.

Tips for improving the chances of loan approval:

  1. Check credit score: Before applying for a loan, it’s important to check credit score and address any errors or areas for improvement.
  2. Lower debt-to-income ratio: Lenders typically prefer borrowers with a low debt-to-income ratio, so paying down existing debt can improve chances of approval.
  3. Provide accurate information: It’s important to provide accurate and complete information on the loan application and documentation to avoid any delays or issues.
  4. Consider a cosigner: A cosigner with good credit can improve the chances of approval and result in better loan terms.
  5. Shop around: Comparing loan offers from multiple lenders can help find the best interest rates and terms.
  6. Have a stable income: Having a stable income, such as steady employment or a consistent source of income, can improve chances of approval.

Loan Repayment and Fees

Personal loans typically offer a range of repayment options to borrowers, including weekly, fortnightly, and monthly payments. Each option has its own advantages and disadvantages, depending on the borrower’s personal circumstances and financial goals.

Weekly payments involve making a payment every week, which can be beneficial for borrowers who receive weekly paychecks. This can also result in lower interest charges over time, as more frequent payments reduce the principal balance quicker.

Fortnightly payments involve making a payment every two weeks, which can align with many borrowers’ pay schedules. This can also result in lower interest charges over time, as more frequent payments reduce the principal balance quicker.

Monthly payments involve making a payment once a month, which can be more manageable for borrowers who receive monthly paychecks. While monthly payments may result in higher interest charges over time, they can also provide more flexibility in managing other expenses and bills.

When it comes to fees associated with personal loans, there are several to be aware of:

  1. Establishment fees: This fee is charged by the lender to set up the loan and can vary depending on the lender and loan amount.
  2. Early repayment fees: Some lenders may charge a fee if the borrower pays off the loan early, as this can impact the lender’s ability to earn interest on the loan.
  3. Late payment fees: If the borrower fails to make a payment on time, the lender may charge a late payment fee.
  4. Annual fees: Some lenders may charge an annual fee for the ongoing management of the loan.
  5. Other fees: Other fees that may be associated with personal loans include redraw fees, administration fees, and early termination fees.

It’s important for borrowers to carefully review the terms and conditions of a loan, including any associated fees, before agreeing to the loan. This can help ensure that there are no surprises or unexpected costs associated with the loan.

Understanding Credit Scores

Credit scores are a key factor that lenders consider when evaluating a borrower’s creditworthiness and ability to repay a personal loan. A credit score is a numerical representation of a borrower’s credit history and financial behavior, ranging from 300 to 850.

The higher the credit score, the more likely the borrower is to be approved for a loan and receive favorable terms such as lower interest rates. Lenders typically use credit scores as a way to assess risk and make lending decisions.

Credit scores are calculated based on several factors, including:

  1. Payment history: This includes whether the borrower has made payments on time, and any instances of missed or late payments.
  2. Credit utilization: This refers to how much credit a borrower is using relative to their credit limit, and is calculated by dividing the balance owed by the credit limit.
  3. Length of credit history: This includes how long the borrower has had credit accounts open, and the average age of their accounts.
  4. Types of credit: This includes the different types of credit accounts the borrower has, such as credit cards, loans, and mortgages.
  5. New credit: This includes the borrower’s recent applications for credit, which can indicate an increased risk of default.

Improving credit scores can take time and effort, but it can ultimately lead to better loan terms and lower interest rates. Here are some tips for improving credit scores:

  1. Pay bills on time: This is one of the most important factors that lenders consider, so it’s important to always make payments on time. If you have missed payments in the past, try to get caught up as soon as possible and continue making on-time payments going forward.
  2. Reduce credit utilization: If you’re using a large percentage of your available credit, it can negatively impact your credit score. Try to keep your credit utilization below 30% of your credit limit, and consider paying down balances to reduce overall debt.
  3. Maintain a good credit history: The longer you have a credit history, the more it can benefit your credit score. Keep your credit accounts open and active, and try not to close old accounts unless absolutely necessary.
  4. Diversify your credit mix: Having a mix of different types of credit, such as credit cards and installment loans, can show lenders that you can handle different types of debt responsibly.
  5. Be cautious with new credit applications: Every time you apply for credit, it can temporarily lower your credit score. Only apply for new credit when necessary, and try to keep applications to a minimum.
  6. Monitor your credit report: Errors on your credit report can negatively impact your credit score. Regularly check your credit report for inaccuracies and dispute any errors you find with the credit bureaus.

By following these tips and practicing responsible credit habits, you can improve your credit score and increase your chances of getting approved for a personal loan with favorable terms.

Choosing a Lender

  • When choosing a lender, there are several factors to consider, including:
    1. Interest rates: The interest rate is the cost of borrowing money, and it can vary depending on the lender and the type of loan. Lower interest rates mean you will pay less over the life of the loan, so it’s important to compare rates from different lenders.
    2. Fees: Lenders may charge various fees, such as application fees, origination fees, and prepayment penalties. Be sure to factor these costs into your decision, as they can add up and make the loan more expensive.
    3. Customer service: Good customer service can make the borrowing process smoother and more pleasant. Consider the lender’s reputation for customer service and whether they offer support options that work for you, such as phone, email, or chat.
    4. Reputation: Look for lenders with a good reputation for ethical practices and transparent terms. Check online reviews and ratings from previous customers to get an idea of the lender’s reputation.
    Tips for comparing lenders and making an informed decision:
    1. Shop around: Don’t settle for the first lender you come across. Compare rates, fees, and terms from multiple lenders to find the best option for your needs.
    2. Read the fine print: Be sure to read the loan agreement carefully and understand all the terms and conditions before signing. Ask questions if anything is unclear.
    3. Consider pre-approval: Some lenders offer pre-approval, which can give you an idea of how much you can borrow and what your interest rate might be before you apply.
    4. Check for hidden fees: Look out for hidden fees that might not be disclosed upfront, such as prepayment penalties or fees for paying by check.
    5. Ask for recommendations: If you’re unsure where to start, ask friends or family members for recommendations of lenders they have worked with and had a positive experience.
    By considering these factors and following these tips, you can choose a lender with confidence and find a personal loan that meets your needs at a reasonable cost.


In summary, a personal loan can be a helpful financial tool for covering unexpected expenses or achieving personal goals, but it’s important to choose a reputable lender and practice responsible borrowing and financial management. Factors to consider when choosing a lender include interest rates, fees, customer service, and reputation, and tips for making an informed decision include shopping around, reading the fine print, and checking for hidden fees. By following these guidelines, borrowers can find a loan that meets their needs at a reasonable cost.

At Fairgo Finance, we are committed to helping our customers make informed decisions about personal loans and manage their finances responsibly. If you have any questions or would like more information about our personal loan options, please don’t hesitate to contact us. Our friendly and knowledgeable team is here to help you find the best solution for your financial needs.

How to Find a Trusted Home Loan Broker in Melbourne

Assessing your options when it comes to securing a home loan can feel like...

Cheap Car Insurance Made Easy: Tips and Tricks for Smart Shoppers

When it comes to car insurance, everyone wants to find a great deal without...

What document explains your rights and responsibilities as a federal student loan borrower?

Answer: The document that explains your rights and responsibilities as a federal student loan borrower...