Personal Loan vs Mortgage – Their Differences and Uses
A mortgage loan and a personal loan are two very different financial products, however, as with most areas of your finances, the features and uses of both loan types can cross over. For example, do you take out a personal loan to renovate the kitchen, or do you draw down on the equity in your mortgage? Do you use a credit card to strengthen your credit history or do you consolidate your high interest debts into your home loan so you have just one payment to make each month?
Where a personal loan can be used to buy smaller items, but can’t cross over into the property market unless you are using it to pay for improvements which will increase the value of your property, a mortgage loan can be used for your home, and for any expense or purchase to do with your home or your lifestyle. Plus, because your home loan is secured against your property, it qualifies for a lower interest rate than an unsecured personal loan.
Features and Benefits of a Personal Loan
A you compare your financing needs, consider the following features and benefits of a personal loan:
- A personal loan is used to borrow smaller amounts, usually less than $100,000.
- A personal loan is paid off over a short period of time, usually seven years.
- Personal loans are typically unsecured.
- Personal loans afford greater flexibility to repay the debt.
- The interest rate on a personal loan is higher because an unsecured loan is riskier for the lender.
- In some cases a lender may ask to secure your personal loan against another asset if the loan amount is significant.
Featured Personal Loan
Aussie now offers Personal Loans for just about anything you like.
Whether for a holiday, home renovations, a special project or even a wedding, a Personal Loan from Aussie can help you pay for any worthwhile purpose. It’s even a smart way to take control of your credit card debt.
- Great rates so that you don’t pay more than you need to
- Fixed monthly repayments make it easier to stick to a budget
- You set the term of the loan so you’ll have repayments you can afford
- Fixed loan term so that you’re set to repay your debt and not let it drag on forever
- Easy to apply and fast approval
Apply now for a personal loan from Aussie. Terms and conditions apply*.
Personal loans are an important part of the retail industry and allow electronics and furniture sellers in particular to secure a sale, send their customers home with the goods, and follow up on payments periodically over time. Since most people are unwilling or unable to save up for their purchases, the strength and resilience of the retail industry rests heavily on the practice of personal loans, because if the stores were forced to wait until we’d all saved up for what we wanted to buy, the retail industry would slow dramatically.
Credit cards are another form of unsecured personal finance, and have an even higher interest rate than personal loans. Where a personal car loan can be secured against the vehicle, a credit card can’t be secured against your new shoes, your groceries or your child’s school fees.
Features and Benefits of a Home Loan
A home loan is significantly harder to be approved for than a personal loan or a credit card, but that is because you can access a wider range of features and benefits:
- To reduce the risk from the beginning by increasing the difference between the loan amount and the property value, or the loan to value ratio (LVR), you will be required to pay a deposit.
- A home loan deposit also proves to the lender than you have the financial responsibility to stick to a regular savings plan.
- Mortgage loan take ups are a barometer of the stability in the economy and the Reserve Bank of Australia (RBA) uses interest rates to control the amount of mortgages being generated.
- In times where there is a fear that inflation may be starting to take hold it is often the practice of the RBA to increase the cost of money, thereby increasing interest rates, with the aim of slowing down the number of mortgages being created because the costs of everyday expenses have increased and there is less room for mortgage repayments.
- If it appears that the economy is slowing too much and there is a real fear that unemployment could result, the RBA would be inclined to lower interest rates which would effectively see more people willing to take up a mortgage to buy a home because they have more income available after their other expenses.
- When more homes are being built it stimulates the economy because there is a demand for workers and building supplies. Those building workers then have more money to spend because they’ve been getting more work and they put that money back into the community.
A mortgage loan is secured against the property, so that if you default on your repayments the lender can take your home, sell it and cover the remaining loan amount.
State Custodians Breathe Easy Home Loan
An award winning loan with all of the necessary features to keep your repayments low and flexible.
- Interest Rate of 6.47%
- Comparison Rate of 6.36%
- Application Fee of $0
- Maximum LVR With LMI: 95%
- Minimum Borrowing: $150,000
- Maximum Borrowing: $1,000,000
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- How to Consolidate Debt – With a Home Loan or a Personal Loan?
- ING Smart Home Loan
- Homeloans MoniPower Line of Credit
- Aussie Optimizer Line of Credit Home Loan
- Macquarie Bank Line of Credit Home Loan
- RAMS Line of Credit Pro Pack 1
- Macquarie Bank Classic Home Loan
- Home Loan Debt Consolidation
- Home Loan Types
- How to use a Line of Credit or Home Equity Loan to Invest
Top Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Loans.com.au - Dream Catcher | A home loan offer with a $0 application fee and one of the lowest available home loan interest rates. | 5.85% | 6.21% | $0 / $375 | 80% | $50,000 / $750,000 |
 
|
 Bankwest Online Home Loan | A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online. | 5.97% | 5.97% | $0 / $0 | 80% | $100,000 / $1,000,000 |
|
 Illawarra Home Loans Bank Beater Home Loan | A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
 State Custodians Mortgage Company Standard Variable Offset Loan | Awarded the 2011 Non bank Lender of the Year this feature-packed loan rewards customers with a bonus rate drop of 0.25% after 5 years. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
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