Loan better than card for young people
There used to be a common practice of parents offering to be guarantor for a young person’s first loan. Usually Mum or Dad guaranteed the personal loan in order for their child to buy their first car. This practice has slipped out of fashion in recent years, but as Aussie founder and executive chairman John Symond says, personal loans are the perfect way for younger people to be able to borrow credit, and subsequently when they’ve established a good payment history, they then have a good credit rating.
He says the advantage of a personal loan is that you pay the debt back over a set period of time. With credit cards, borrowers rarely repay the principal, which means you are basically paying a high interest rate without reducing the loan. “By the time you’ve paid the personal loan off, the lender can see you’ve done a good job, made your payments on time and then they may be more likely to give you a credit card, or lend you money for a property down the track.”
Source: Aussie Home Loans