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A personal loan is a monetary loan you can get from a credit provider such as a bank, credit union or online lender – usually for a specific life purpose like renovating your home, paying for a holiday or consolidating several smaller loans.

Lenders approve personal loans by evaluating your creditworthiness.

When you enter into a contract for a personal loan, you typically receive money in a lump sum and agree to repay the lender back the money in regular instalments over a specific length of time.

You also pay interest on the amount you borrow, and in some cases, you may pay fees and other charges. These interest rates, fees and charges can vary from lender to lender, loan to loan and borrower to borrower.

How do personal loans work?

If you’re considering a personal loan, you should become familiar with some of the details, including how much you can borrow, how to apply and how much they cost. Here are some of the main concepts to remember:

• The amount you can borrow. Personal loan amounts can be very small or very large. We’ve seen lenders offer loans as little as $500 and as large as $70,000.
• The application and approval process. You can apply for some personal loans online in a matter of minutes and be approved (or denied) just as quickly. With others, you may have to visit a branch and it may take days for the approval process to complete.
• The cost. On top of requiring you to repay the loan amount, lenders make their money by charging you in a number of ways. These may include interest on the loan, as well as fees like an establishment fee, monthly fees, late payment fees and early discharge fees. Your specific combination of charges will be described in your contract.
• The loan term. This is how long you’ll be paying off the loan. We’ve seen loan terms as short as 3 months or as long as 7 years.
• The amount of repayments and when they are due. Your loan amount, interest rate and loan term will be set in advance, so it’s easy for the bank to calculate exactly what your regular payments will be and when they are due.

Types of personal loans

Here are the main types of personal loans you may encounter:

• Unsecured personal loans. Your standard personal loan you can use toward various life projects like a holiday, home renovation or medical bill.
• Car loans and other secured loans. A personal loan where you offer up an asset as collateral in case you can’t make your payments. This collateral is officially known as the security. Take for example a car loan, where the purchased car serves as security that the bank can repossess if you can’t make your payments
• Debt consolidation loan. A special type of personal loan you would use to pay off several smaller loans.
• Line of credit. A personal loan where a specific amount is available for you to borrow, but you don’t have to borrow it all. You only pay interest on the amount borrowed.
• Quick cash loan. A personal loan that doesn’t have a strict acceptance criteria so that people with lower credit scores can get the loans they need. These often come with higher interest rates and fees.

How much do personal loans cost?

The cost of personal loans will differ from person to person and loan to loan. A large part of this comes down to your creditworthiness. For example, someone with a higher credit score and a more positive borrowing history will often pay less for the same loan than someone with lower marks.

Here are some factors that will determine how much you’ll pay:

• Interest rate. This the percentage your debt will increase every year. Most personal loans will charge an interest rate. The Australian Securities & Investments Commission has capped interest rates at 48% but we’ve seen rates as low as 5.75%.
• Fees. Many loans will also charge fees on top of the interest, such as a one-off establishment fee to set up the loan or even monthly fees. Some very small loans might do away with an interest rate altogether in favour of one set loan fee.
• Comparison rate. This is simply a loan’s interest rate when fees are factored into it. Since not all loans charge the same fees, this comparison rate makes it easy for you to compare the loan cost of several loans side-by-side.
• Length of loan. Since your interest rate adds to your balance each year, the longer you have your loan, the more you’ll end up paying in the long run (all else being equal).
• Amount borrowed. Generally speaking, the more you borrow, the more you’ll end up paying for the loan.

How do you apply for a personal loan?

1. Decide how much you want to borrow. Work out how much money you need for your holiday, home renovations, debt consolidation or whatever personal project you need the funds for.
2. Work out how much you can afford for payments. Use a loan calculator to work out how long you’ll need to pay back the loan, based on how much you can afford to pay back per month.
3. Compare personal loan options. Identify a few lenders with loans that meet your criteria from the first two steps. You can find special loan offers for Credit Simple users here.
4. Gather your paperwork. Gather together any paperwork the lender asks for. This may include ID, bank statements and proof of address.
5. Apply. You can apply for most personal loans conveniently online.

Does applying for a personal loan affect your credit score?

When you apply for any loan, your credit score can dip slightly. However, with Australia’s Comprehensive Credit Reporting system, regular on-time payments can help your score go right back up.

Some lenders will advertise something along the lines of “free rate quote that won’t affect your credit score.” This means they will quote you a rate based off of basic info like your income and the amount you want to borrow – without doing a credit check.

But this is not the same as applying for the loan. If you want to apply for the loan based on the rate quoted to you, you will usually have to go through a credit check and your score may dip as a result.

Who should get a personal loan?

You should only get a personal loan if you have a specific purpose in mind for the money: to help pay for a special project, purchase or life event, or to help out in a time of emergency.

Taking out a lump sum without any real purpose for it could lead you to squander it and end up with a large debt with not much to show for it. For regular ongoing purchases you plan to pay off regularly, you could consider a credit card instead.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual or business. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post What is a personal loan? appeared first on Credit Simple.

Valentine’s day is just around the corner. And you know what that means: candle-light dinners, romantic water-side strolls, mouth-watering chocolates, exquisitely arranged bouquets and… your beloved’s outstanding debt? 

At first you’ll be enamoured by that special someone’s talents and strengths but there will come a day when you have to face their flaws. And no, we’re not talking about letting one rip in the middle of a Netflix special, because we all do that.

What we’re talking about here is the possibility that your loved one has poor financial habits – habits that could get you into trouble if you’re not careful.

We have an easy-to-follow guide to help you avoid becoming an unwitting victim to your partner’s illicit financial rendezvouses, but we just wanted to take this opportunity to offer a few reminders – so that this Valentine’s Day, you’re not seduced into a lifetime of financial betrayal.

How to avoid financial betrayal

Let’s just jump right in. Here are some ways you can protect yourself from your partner’s poor financial habits:

Be wary of going guarantor. 

Going guarantor on your partner’s loan means they don’t have the financial capability or credit health to get the loan themselves. Instead, they need to leverage your good financial standing. If they default, it’s on you. No ifs, ands or buts.

Pay attention to your joint credit accounts. 

In most cases, you’ll be just as responsible as your partner for any debts accrued on accounts you hold together. If they run up a huge bill on luxury bags or huge nights out with the boys, the lender and/or debt collections agencies can come after you.  

Check your statement regularly and if you see dodgy transactions, talk to your partner about your concerns. Seek couples counselling if necessary.

You should also check your credit score to see what, if any, your partner’s financial habits are having on your score.

Seek legal advice 

In the event of a divorce or separation, the combined debts that you and your partner accrued during the relationship will get deducted from the overall joint asset pool. 

This includes debt from joint credit accounts AND credit accounts in each of your individual names. So if your partner ran up gargantuan debts, you’ll end up with fewer assets when it’s all said and done – even if you weren’t aware of the debts at all.

However, there may be a remedy. If you can prove to a court that your partner accrued these debts without your knowledge and it’s clear the debts were of sole benefit to your partner, you may be able to get a court order removing these unscrupulous debts from the asset pool.

Bottom line

We don’t want to put a damper on your Valentine’s Day, since it’s meant to be a celebration of the love and respect between you and your partner. But it’s also a time when we’re too quick to don those rose-coloured glasses that hinder our ability to see the whole person we’re dining with. 

So by all means, enjoy your romantic day. Feast on that gourmet Italian cuisine, fine wine and luxury chocolates. Just make sure the one who is footing the bill can actually pay it off – or it could foreshadow a lifetime of financial heartache.

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Now that Australian banks are including positive credit behaviours in their reports to the credit bureaus, it’s much easier than it used to be to fix your credit score.

So even if a few late payments or even a default knocked you back a few points, there are ways to work your way back into better credit territory.

Here are the steps you’ll need to take to fix your credit rating and get it pointing in the right direction.

1. Know thy credit score

It’s hard to get from point A to point B if you don’t know where you currently stand. Credit Simple gives you your credit score – courtesy of credit bureau illion – in the form of a dial that shows you how far away you are from a perfect credit rating.

You can also see your credit report, which contains the actual loan records that illion uses to calculate your credit score. That means you can see exactly what’s helping it and exactly what’s hurting it.

There are other credit bureaus in Australia and you can request your credit score and credit report from any one of them.

2. Dispute any reporting errors

If your report says you defaulted on a payment to your mobile phone company but you know you never did, you can take it up with the credit bureau or the phone company itself. Same with other lenders.

They’ll investigate the matter and remove the negative incident if they find there’s been an error.

Credit Simple conveniently lets you raise a dispute right through the website.

3. Fix your own mistakes

Look through your credit report and see if there are any late payments you may have forgotten about.

If a late payment of $150 or more is more than 60 days overdue, your lender can report it as a default. This will stay on your record for five years, so you can see how important it is to nip late payments in the bud.

4. Pay your bills on time

Now that you’ve cleared up any errors and took steps to minimise further damage, it’s time to start building your credit score back up. The good news is that Australia’s new credit reporting scheme rewards you for doing the bare minimum of paying your bills on time!

The easiest way to do this is to set up direct debit. This will allow your payments go through automatically while you sit back and watch your credit rating start to tick back upward.

5. Stay credit active

Lenders want to see that you’re a responsible borrower and the only way to prove that is to have a healthy amount of debt (and of course, to make your payments on time). Certain loans, like home loans, will often boost your score just because you have it.

Others, like quick cash loans or certain credit cards, will lower your score temporarily. However, if you pay them on time they can serve as a good stepping stone toward the more desirable loans and your score may eventually rise even higher than before.

Fixing your credit score is easier than ever

Unless you have a perfect credit rating, there’s always room to improve. And with positive credit reporting happening in Australia, fixing your credit score is easier than ever. There’s no better time to get started than now – the future you will thank you.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post How to fix your credit score in 5 easy steps appeared first on Credit Simple.

So business is booming and you’re not content to just maintain the status quo…. you want to grow your business into something bigger. Well, strap in because you’re in for an exciting ride that will expand your skills, test your mettle and ideally put your business on the trajectory toward bigger success.

Here are some tips that any small business, sole trader or freelancer can use to grow their business, regardless of industry.

Decide how you want to grow

There are many ways to grow your business, so you need to decide how you want to grow. Here are some examples.

You can:

• Add new products or services to your offering. A piano teacher has a unique and effective method of teaching and decides to develop an instructional app that utilises this method. Or a craft brewery decides to expand the number of varieties of beer it brews.
• Open up a new physical location. The brewery’s owner is a hit in his home town and he sees an opportunity in a location a few towns over.
• Go premium. A photographer realises her work is unrivalled, so she drastically increases her prices and targets the premium market. A move like this could significantly change the way you do business.
• Hire another “you”. The piano teacher hires a former student to teach her method to students, allowing her to double the number of students she can reach.

Take advantage of credit

Most of the examples above will probably require a financial investment: to fix up the new physical location, to boost your marketing, to develop the app or to hire the new employee.

If you have your sights high, now’s the time to start thinking about building your business’ credit history.

If you’re registered as a company with the Australian Securities and Investments Commission (ASIC) and you have an Australian Company Number (ACN), your business will have a credit file – which may or may not be empty depending on how much borrowing you’ve done.

As long as you are in a position to pay it back on time, getting a loan is a good way to build your credit history – as is signing up for utilities (phone internet, power, etc) in your business’ name.

This can be beneficial for the following reasons:

• It helps with future loans. When/if you need bigger loans in the future, lenders will want to see a positive credit history.
• It helps with partnerships. Potential partners can also access your credit score to determine if they want to do business with you, so a good track record does much more than help you get loans.

Before you get any new loans, it’s good to know where you currently stand. If you sign up for Credit Simple for Business, you can see your business credit score and history for free, forever. You must be a director in your business in order to access it.

Build processes

This means developing a series of repeatable steps that help you achieve a particular outcome for your business, for example, a six-step process for vetting a supplier.

Having processes in place will free up time for you to focus on growing your business, make training new employees a lot easier and help you avoid costly mistakes (like taking on an unreliable supplier).

You can build processes into almost every business function: customer service, public relations, accounting, IT, operations and more.

Learn marketing

Many small business owners are skilled in a specific area related to their product or service, and that has been enough to keep them operating on a small scale.

Maybe you’re a photographer whose stunning family portraits and fair pricing drive enough word of mouth to keep you employed. But if you want to drastically increase your business, you’ll need to improve your website, advertise, network and possibly partner with other service providers such as a makeup artist.

The skill set required for these activities is different than that required to take stunning photos, so you’ll need to adopt a sales and marketing mindset sooner rather than later.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

The post Here’s how to grow your business if you want to take it to the next level appeared first on Credit Simple.

Just as we hoped, Comprehensive Credit Reporting (CCR) has improved the credit scores of millions of Aussies.

Late last month, the Big Four banks shared the remaining 50% of lending data with the credit bureaus, marking the biggest milestone in the history of the new reporting regime.

Literally overnight, nearly half of all Aussies using Credit Simple received an improved credit score.

What is Comprehensive Credit Reporting?

CCR is a reporting scheme that takes all of a borrower’s credit history into account, both good and bad.

Prior to this, lenders were only sharing the bad stuff with the credit bureaus: things like late payments, defaults and making too many loan applications.

Now the bureaus see more of the good stuff, like on-time payments and accounts in good standing.

For that reason, this type of reporting is sometimes called positive credit reporting.

Most other developed countries have been using positive reporting systems for quite some time, so it’s a welcome change Down Under.

Has it helped?

Initial results seem to suggest that positive credit reporting lives up to its name. In fact, nearly half of Credit Simple users saw their credit scores increase – by an average of 27 points on the 1,000-point illion scale.

On the flip side, nearly 30% saw their scores decrease – by an average of 53 points.

26% saw no changes to their score.

What should you do if your score changed?

CCR offers a number of opportunities for you to improve your financial situation, whether your score increased or decreased.

If your score increased

If your score increased, you should immediately try to take advantage of your good fortune. The number one way you can do that is by negotiating better rates with your lenders.

Our research shows that homeowners positively affected by the new scheme could save 0.5% p.a. off their current mortgage rates, which for a $373K home loan (the national average), works out to be a saving of $112 per month or $40,000 over 25 years.

With a higher score and more transparency into your credit file, you can now walk into such negotiations on the front foot.

If your score decreased

There’s still plenty to be positive about even if your score went down. For one thing, you now have more transparency into why it went down. The comprehensive nature of the new scheme means there’s more information on your credit file – information that you can easily access and view using a tool like Credit Simple.

With all this information at your fingertips, here are some steps you can take to improve your score:

• Look closely at your credit history. Log into Credit Simple or request your credit history from one of the bureaus. If you see a late payment you totally forgot about, pay it as soon as you can. If you see any negative events you don’t recognise, alert the credit bureau and your lender. With Credit Simple, you can alert us right there in the tool.
• Set up direct debit. Paying on time used to not account for much, at least as far as your credit score went. Now you’re rewarded for it with a higher score. Set it and forget it using direct debits and watch your score climb over time.
• Keep a healthy amount of debt. Your credit score and credit history are important because they show how well you can handle debt. That means you have to have some debt in the first place. If it’s within your means, consider getting a simple, low cost credit card if your credit history is bare.
• Have birthdays. Demographics also play into your score. As you age, you get the advantage of being identified with a group of people widely considered to be good borrowers. As long as you don’t make a lot of financial mistakes, your score should increase as the years go by.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

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As the winter months come to an end in Australia, you’re probably antsy to get out in the warmer weather. But getting out more could also mean increased spending.

If you’re trying to figure out how to save this spring and summer, easy ways to get a boost include sticking to a budget, using credit card rewards, having social functions at home and saving on energy costs.

1. Stick to a budget

Sticking to a budget is easier said than done, right? But it does work, especially with new spend tracking technologies.

First, figure out your monthly income after tax. Then, make a list of monthly expenses, including housing costs and bills. Look at past statements to figure out how much you spend on groceries and other necessities.

Make firm commitments on how much you can spend in each category.

You’ll see how much you should have left over each month, and you can be mindful of unnecessary spending. Make firm commitments on how much you can spend in each category.

Pro tip: use a program like Money Simple, where you can track all of your financial accounts and your spending habits.

2. Use credit card rewards

Many people across the nation have credit card debt, which may stop them benefiting from rewards programs. Australia’s Securities and Investments Commission (ASIC) reported that one in six Aussies struggle with credit card debt.

However, if you can pay off your debt and begin to use your credit card almost like a debit card, you can earn substantial rewards.

Use your card as if it’s linked to your checking account, and pay it off once or twice a month. Most credit cards have a rewards system where you can get cash back on every purchase.

As long as you stay on top of your balance, you may never have to pay interest. You could instead cash out those rewards. Doing so may give your savings an extra boost without having to do anything but spend money normally.

Just make sure you don’t accrue any debt from one month to the next. And, watch out for credit cards with high annual fees.

3. Eat and drink at home

Eating and drinking out can really drain your account. Instead, try having friends over for a night in.

In 2016, the average household spent around $50 per week on restaurant dining.

Buy groceries more often so you won’t be tempted to eat out. An ASIC survey found that in 2016, the average household spent around $50 per week on restaurant dining.

During tight months, that extra money can really come in handy.

4. Save energy costs

Warmer months can be a great time to save extra on energy costs. Simple tactics you can try include using energy-efficient LED light bulbs or washing your clothes in cold water, Canstar suggests.

You can also review your current electricity and gas plans and see if you’re getting the best deal for your area.

This spring and summer in Australia, try these simple savings strategies. For more information about how to manage your money, sign up for Credit Simple today.

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Don’t believe you have to have a credit card. Paying interest sucks and there are other ways to pay. It sucks the lifeblood out of your finances. That’s because unless you clear your entire bill within the interest free days, you pay interest.

That interest means you’re paying as much as 20% more than your mates for the same things, which may have a detrimental effect on your finances over time.

Other (sometimes better) ways to pay

Thankfully there are way more credit-free ways to pay than ever before that are far better for your bank balance. Here are some of the options.

Debit card. One of the arguments for needing a credit card is the ability to shop online. All banks now offer either Mastercard or Visa debit cards. They look like credit cards and can be used anywhere that displays the Mastercard or Visa logo, but you can only spend your own money, not credit.

POLi and BPAY. Both POLi and BPAY are payment methods that take the money direct from your bank account. Your payment is approved immediately. You can use POLi to pay online at Microsoft, Facebook, MightyApe, Virgin Australia and other etailers. BPAY is typically used to pay bills. Banks aren’t keen on third-party payment systems, and have in the past warned about the potential for fraud.

Pay later. It’s called the modern form of laybuy. Afterpay, zipMoney, Openpay and others allow you to buy now, receive the item, and make interest-free payments over several weeks. The problem is if you miss a payment the charges can prove more expensive than interest. Non-payment may also put a black mark on your credit record.

EFTPOS. EFTPOS is another credit-free way to pay in Australia. EFTPOS has announced that it is looking at ways for Australians to pay online using their EFTPOS cards.

Pre-paid travel cards. Pre-paid currency cards such as Travelex Cash Passport, NAB Traveller Card and Global Wallet work like debit cards when you’re travelling overseas. The catch is that you pay fees and commissions that make this an expensive way to spend.

PayPal. This online payment method that you can load up and spend can be used for eBay payments and at retailers such as Woolworths, Country Road, Jetstar and others. Stripe is another similar offering that is now available in Australia.

Bitcoin. You can pay for a growing number of real life purchases using your Bitcoin wallet. I do own a very small amount of Bitcoin and look forward to the day when I can spend it and bypass my bank’s fees. In Australia CoinJar is growing in popularity as a Bitcoin wallet. Just remember that Bitcoin is very new and anything could happen. 

Cash. What’s that, you say? Sometimes ditching the plastic and spending cash is the most sensible option. Withdraw cash at the beginning of the week, split the money between envelopes for different purposes such as shopping and entertainment and once each envelope is empty just stop spending.

There are other forms of payment coming on. For example Apple Pay has made it to Australia and is available in stores such as Woolworths. It’s possible to use Alipay for some purchases and there are stores that accept WeChat red envelopes in parts of Australia. However payments from these are usually connected to your debit or credit card so aren’t in effect changing the way you spend. 

Of course credit cards do have uses when you have an emergency. But everyday things such as buying groceries or school uniforms aren’t emergencies. They need planning for.

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