The short version
- Most lenders lend $50,000, so compare the total cost, not just the rate.
- A shorter term means higher repayments but less interest.
- On a larger loan, a lower rate saves more, and security can help you get one.
What a $50,000 loan costs
Your repayments depend on the rate you're offered and how long you take to repay. These examples leave out fees, which add to the cost:
- At 8% a year: $1,567 a month over 3 years, $1,014 a month over 5 years, $779 a month over 7 years.
- At 12% a year: $1,661 a month over 3 years, $1,112 a month over 5 years, $883 a month over 7 years.
- At 18% a year: $1,808 a month over 3 years, $1,270 a month over 5 years, $1,051 a month over 7 years.
Choosing the term
A longer term lowers each repayment but means paying interest for longer, so the loan costs more in total. Pick the shortest term whose repayments you can comfortably afford, and check whether you can pay extra or pay off early without a fee.
Fees matter more on smaller loans
Look at the comparison rate as well as the interest rate. The comparison rate adds the lender's standard fees to the interest rate for an example loan, so it shows the cost of two loans on the same footing.
Secured or unsecured
For $50,000 or more, a secured loan, usually against a car, often comes with a lower rate. The catch is that the lender can take the asset if you can't repay. An unsecured loan puts nothing at risk but costs more.
Pros
- Pay a $50,000 cost now and spread it out in set repayments.
- Usually cheaper than a credit card for the same amount.
- A set end date, so the debt is gone by the end of the term.
Cons
- Interest and fees add to what you pay.
- A new application adds an enquiry to your credit report.
- Larger unsecured loans need stronger income, and some lenders cap them lower.
Alternatives
- Redraw or offset on your home loan. If you have extra repayments in your home loan, using them can be cheaper than a new loan, as home loan rates are usually lower.
- A secured personal loan, if you're buying a car or have one to offer as security.
- Saving first. If the cost can wait a few months, saving for it costs nothing in interest, and a high interest savings account pays you instead.
What you'll need to apply
Most lenders ask for the same things, and having them ready speeds up approval.
- Proof of identity, such as a driver's licence, passport or Medicare card.
- Proof of income, usually your last two payslips, or tax returns and financial statements if you're self-employed.
- Details of what you spend each month and what you already owe, including credit card limits.
- Your address history and, for a secured loan, details of the asset you're offering as security.