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Brokers should think twice before dismissing personal loans as ‘bad debt’, according to one lender.
Fair Go Finance managing director Paul Walshe wrote in a blog for The Adviser that while personal loans are sometimes inappropriate, they can also be the perfect solution to a financial problem.
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“While savings should be the preferred method of funding purchases, a personal loan may be a viable alternative when there isn’t the luxury of time to accumulate the savings or the ability to turn to family or a partner for help,” he said.
“When this urgency arrives, brokers should be able to easily provide a solution to customers, if for no other reason than to stop them going to a bank for the answer.”
Mr Walshe said another benefit of personal loans is that they can help borrowers create a repayment history.
“Ultimately, like any financial decision and broking transaction, responsible lending is critical to this being suitable to the client,” he said.
“But before you write off personal loans as bad debt, consider whether they could be a real option for your clients and a new way for you to meet their needs.”
[Related: Diversification equals dollars, say lenders]
Click here to read Paul Walshe’s blog on how personal loans can benefit brokers and their clients.
