What is your "Lifestyle Loan" costing you??
We have seen a real emergence of Life Style Lenders in recent times. And unlike past generations who felt a real stigma attached to borrowing from these last resort type lenders, today's generation have no qualms at all. Through retail and the media reinforcing instant gratification, these loans have become normalised and more widely accepted.
So, firstly, what are Lifestyle Loans??
These are usually loans that are very quick and easy to access which many consumers use to fund the "fun stuff" we want to own. The things you can't normally afford to pay for out of your weekly pay packet.
But buyer beware! THESE LOANS ARE EXPENSIVE and that is why we would discourage you from using them unless you absolutely needed to.
Let's look at some comparisons with Interest/Costs paid on a $1200 loan over 9 month term.
Fast Loan $672
Speckle Fast Loan $336
Credit Card $92.12 (rate = 18.97%)
Personal Loan $62.65 (rate = 12.99%)
Whilst the Fast Loan doesn't actually charge you interest, it is the fees and charges that when annualised out are the equivalent to a 50% rate. There are usually Loan Establishment fees (in this case 20%), and annual Loan Service Fees. And if you find yourself in default with one of these loans, the Default Fee can be as much as 200% in some cases.
Knowing that it is equivalent to an interest rate of 50% makes this loan a whole lot less appealing - doesn't it??!!
So, our advice...
Unless it is an absolute necessity, avoid these loans. Put money aside and save for lifestyle items, or look at less expensive ways to borrow, such as the personal loan option above.
And always ask yourself "Do I really need it?".
If you are having trouble paying your household bills we strongly suggest getting in touch with the providers such as your energy company. They will be able to set you up on a payment plan to help you reduce the debt.
For any advice on personal lending and budgeting, our brokers are happy to chat and put you on the right path. Call 03 5443 9098 or email email@example.com anytime!
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ref: Effie Zahos: Channel 9