Not all loans are created equal, and some deals are scarier than they seem. Whether you’re looking at buying a new car, consolidating debt, or covering a special expense, it’s important to know what you’re signing up for. Some loans may look appealing on the surface, but dig a little deeper, and you might find a few skeletons in the closet.
At APS, we believe that loans should be clear, fair, and tailored to you. So let’s shine a light on five common loan traps to watch out for, and how you can avoid them.
1. Balloon payments
Balloon payments might sound harmless, but they can cause a nasty shock down the road. These are large lump sum payments due at the end of your loan term. While they can lower your monthly repayments at the start, they often leave borrowers scrambling to come up with thousands of dollars at the end, or worse, refinancing into a new loan just to cover it.
If a lender offers you a loan with a balloon payment, ask yourself, will you be in a position to pay it off comfortably when the time comes? If not, it might be worth looking for a more straightforward repayment structure.
2.Hidden fees
Some loans come with a web of extra costs that aren’t immediately obvious. Establishment fees, early exit charges, monthly account keeping fees, insurance add-ons, they all add up. Unfortunately, these hidden costs are often buried in the fine print.
Before signing anything, make sure you get a full picture of all fees involved. A reputable lender will always be upfront about the true cost of the loan, so you’re not left with any nasty surprises.
3.High-interest payday loans
When you’re in a pinch, payday loans might seem like a quick fix. But they come at a steep price. With eye-watering interest rates and extremely short repayment windows, these loans can trap people in a cycle of debt that’s hard to break.
If you’re facing urgent expenses, talk to a trusted lender or financial counsellor before resorting to high-interest credit. There are usually better, more manageable options out there, and we’re always here to help you find them.
4. Not checking the comparison rate
A low advertised interest rate can look appealing, but it doesn’t tell the whole story. The comparison rate gives you a clearer idea of the loan’s true cost, because it includes fees and charges alongside the interest.
Make sure you compare apples with apples by looking at the comparison rate, not just the headline rate. This will help you make a better-informed decision and avoid unexpected expenses.
5.Choosing the wrong lender
Some lenders are more interested in profits than people. They might offer slick marketing and fast approvals, but when you need support or flexibility, they’re nowhere to be found. That’s why it’s so important to choose a lender who genuinely has your best interests at heart.
At APS, we take a personal approach to lending. Our team takes the time to understand your needs, explain your options clearly, and support you every step of the way. Whether you need a car loan, a personal loan, or something more specialised, we’re here to help you find a fair, manageable solution that works for you.
What makes an APS loan different?
We’re a profit-for-member organisation, which means we exist to support our members, not to maximise profits. Our loans are designed with your financial well-being in mind, with:
- Clear, honest information from the start
- Fair interest rates
- No balloon payments or hidden costs
- Personalised service from a friendly, experienced team
We’ll never pressure you into something that’s not right for you. Instead, we’ll help you understand your options and choose a loan that suits your goals, your budget, and your lifestyle.
Loans can be incredibly helpful when they’re done right, but they can also become stressful if you’re not careful. By steering clear of common traps like balloon payments, hidden fees, and high-interest payday loans, you can protect your future and make confident decisions.
If you’re thinking about taking out a loan or just want to chat about your options, our team is here to help. We’ll walk you through everything with clarity and kindness.
Get in touch with our loans team and see how we can help.
Written by Loans Officer, Scott Davidson
Scott brings over 25 years of experience in the finance industry, having worked across a variety of roles since starting his career with AGC in the 1990s, where he specialised in credit control and wholesale finance. His passion for travel eventually led him to spend time overseas before becoming a valued member of the APS team. He specialises in personal lending solutions, including both secured and unsecured loans, and also assists members with investment savings accounts. Scott is committed to helping you find practical, personalised financial options that suit your needs.