Compare personal loans from 6.57%

What is a personal loan?

A personal loan is a financial product where you borrow money from a lender or financial institution, and make regular repayments with interest over the loan term (usually between one and seven years).

Personal loans can be big or small, typically ranging from $500 to $100,000. The lower and upper limits of loan products depend on the provider.

While personal loans are a less flexible form of credit than a credit card and don’t offer the same benefits, the interest rates on personal loans are generally far lower than those on credit cards. 

A personal loan is one of the simplest financial products on the market. There are a wide variety of providers offering personal loans in Australia, including the big four banks, customer-owned banks and non bank lenders.

What can I use a personal loan for?

There are a variety of reasons you might take out a personal loan. Here is a selection of the most common.

• Holiday loan: If your savings won’t quite cover the trip of your dreams, a personal loan could offer a way to increase your holiday budget. Many providers offer special products specifically designed for holidays.

• Weddings: Personal loans are useful for one off large expenses. If you take out a loan for a wedding for example, you can pay it off slowly after the wedding, rather then waiting until you have the money you need saved before getting married.

• Debt consolidation: A common way to streamline debt obligations is to take out a consolidation loan. This essentially means you take out a personal loan that covers all your outstanding debts. You then pay everything you owe and just pay off the consolidation loan, so you only have one loan to pay off instead of several.

How to compare personal loans

There are several avenues for you to explore when seeking a competitively-priced personal loan, but these are two of the top things to consider:

• Secured loans: Securing an asset against the loan, say the car you’re purchasing, could fetch you a lower interest rate. Though the consequence of this is that if you default on your loan, the lender could take your asset away. Generally speaking, the lowest interest rates for secured personal loans these days hover around the 5-6%, however this is heavily reliant on the next point…

• Risk-based loans: Many lenders have tiered lending rates, with the cream of the crop going to borrowers with the best credit scores and borrowing history.

Not all personal loans are created equally. Here are a few things to look out for when comparing personal loans.

Fees

Most personal loans charge an application and ongoing fee, and some are a bit sneaky and will even charge you a fee for getting on top of your debt and making extra repayments. Break costs and missed payment fees may also apply.

Before taking out a personal loan, make sure you understand what fees the lender will charge. Get a full list of the fees that apply: you can find out what fees will be charged by reading the product disclosure statement (PDS). Fees for secured personal loans are often lower than fees for unsecured loans because of the reduced risk to the lender.

Interest rate

You’ll find that interest rates on personal loans are either variable or fixed. 

Variable interest rates can be raised or lowered by the lender at any time over the course of the loan term. Choosing to go with a variable rate means that you may not have the repayment certainty that a fixed rate provides.

On the other hand, fixed interest rates are exactly that: fixed, which means you know the rate (and your repayment amount) will stay the same for the duration of your loan which can be great if you’re trying to budget. While locking in a fixed rate means you know your rate isn’t going to go up, it does mean you potentially miss out on an even lower interest rate if your lender decides to reduce rates. As you can see, the decision to go with a variable or fixed rate can be a bit of a gamble.

Don’t forget to look at the comparison rate when comparing personal loans as this is often a better reflection of the loan’s true cost, since it accounts for the interest rate and fees.

A good way to bring your interest rates down is to secure the loan against some asset (a car loan is an example of a secured personal loan, as the car itself is the security). Secured personal loans typically have lower rates, but the lender has the right to take ownership of your asset in the event of a default.

Extra repayments

Most variable rate personal loans allow you to make extra repayments and some fixed rate loans will also allow this, but there may be a limit on the amount that can be repaid early.  You may also be charged early repayment fees and an early exit fee for repaying the loan earlier than the initial loan term.

Look for a loan that allows you to make extra repayments without incurring an early repayment fee and ask the lender what their repayment flexibility is like.

Other things to consider when seeking a low rate personal loan

There’s a few things to look out for when it comes to finding a secured loan, aside from just the interest rate and monthly repayment.

• Flexibility: Some lenders charge fees for making extra repayments, while others do not. If you want to get ahead, it could be a good idea to find a loan that doesn’t penalise you for paying it off early.

• Minimum and Maximum Loan Amount: Some lenders are only willing to lend between a certain band, with most lenders requiring a minimum loan size of around $2,000 - any less and you venture into payday lending territory. Conversely, most lenders have a lending cap, too, with many hovering around $50,000.

• Eligibility Criteria: Most creditors require you be at least 18 years of age, and an Australian citizen or permanent resident. Many have minimum income requirements, too.

• Loan Term: This usually varies anywhere from six months to five years. Some car loans now are offered over seven years. The longer your loan term, the more interest you ultimately pay, but the lower your monthly repayment - most people like to strike a blend of manageable monthly payments, and appetite for interest.

• Redraw facility: Some personal loan products will allow you to make extra repayments, and then give you the option to take this extra money out if needs be. This gives you added confidence if you are trying to pay the loan off quickly.

• Bad credit personal loans: Generally, having a bad credit score will restrict the range of personal loan products available to you. However, some providers offer special bad credit personal loans, where the lender will tailor the loan to your situation.

Consider your options

As with any type of loan, it’s important to do your research and compare your options. Before taking out a personal loan, look for a competitive interest rate with low fees. You should also consider a personal loan that allows fee-free early repayments so you can get on top of your debt faster without being penalised for doing so.

While you should definitely compare and shop around, be careful not to apply for too many loans as this can hurt your credit score. 

Types of personal loans

There are two main types of personal loans: secured and unsecured. 

Secured

A secured personal loan is where you use an asset (like a car) to be used by the lender as security against the debt. If you’re unable to repay the loan, the lender can sell the asset to recoup your debt.

A secured car loan is like a secured personal loan except the loan is only used to purchase a car. You can generally use a secured personal loan to purchase almost anything like a holiday, wedding, engagement ring, home renovations and so forth, as long as the value of the asset is equal to or greater than the value of the loan.

A car isn’t the only thing that can be used as security; other assets that can be used include equity in your home, term deposits, or even expensive items like jewellery or artwork however this may vary from lender to lender.

Secured personal loans generally have lower interest rates than unsecured personal loans, though the interest rate you are charged can depend on your credit rating. Borrowers with bad credit ratings may have to pay a higher rate of interest than borrowers with good credit scores. 

Compare secured personal loans

Unsecured

As the name suggests, unsecured personal loans allow you to borrow money without being required to put up an asset as security for the loan. Because of this, interest rates on unsecured loans are generally higher than they are on secured loans because the lender is taking on a greater risk by not having an asset to fall back on if you’re unable to repay the loan. But that doesn’t mean you can just get off scot-free if you can’t afford to repay the loan: the lender can still take legal action against you if that happens. 

Unsecured personal loans allow you to borrow money for any legitimate purpose, whether that be for a wedding, an engagement ring, a car, a holiday, home renovations, funeral expenses, an unexpected bill and so on. 

Because you’re not offering up an asset as security for the loan, the lender may ask what you’re using the unsecured personal loan for, which may form part of their decision to lend to you. You may also be asked to give evidence that you can afford to repay the loan by providing the lender with recent bank statements and proof of employment. Borrowers with bad credit scores will potentially be made to pay a higher rate of interest than borrowers with good credit scores. All of this is done to protect the lender.

You can generally borrow up to $50,000 for an unsecured personal loan though there are some lenders who may allow you to borrow up to $100,000.

Compare unsecured personal loans