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Australians from all walks of life sometimes need a financial helping hand. Whether it’s paying for education, starting a business, or splurging on a dream wedding, holiday or car, a little help from a personal loan can sometimes be just what you need to make your dream a reality. 

A personal loan is when you borrow money that is repaid in regular installments plus interest over a set period of time (usually 3-5 years). A personal loan can be used to buy a car, consolidate debt, pay for a holiday and much more. Most providers offer personal loans anywhere from $1,000 to $300,000. 

At RateCity, you can not only compare personal loan rates on a range of personal loan options side by side, but also compare their other features and benefits to make a more informed decision when selecting a suitable lender for your financial situation. 

What can you use a personal loan for?

There are a number personal loan uses, including:

  • Buying a car
  • Consolidating debt
  • A holiday
  • A wedding
  • Renovations
  • Student fees 

How do I choose the best personal loan?

Using RateCity’s online personal loan comparison tools is an effective way to assess the personal loan market, compare how much money you want to borrow against different personal loan rates and how much time it will take to pay the loan back. 

When you do a personal loans comparison, you should decide which of the following will best suit your financial situation:

  1. A variable or fixed interest rate
  2. A secured or unsecured car loan
  3. The length of your loan
  4. Whether you should apply for a bad credit personal loan
  5. Whether you will make extra repayments
  6. Whether you need a redraw facility 

What is an interest rate?

The interest rate is the percentage of extra money you’ll need to pay back to your lender with each loan repayment. When you compare personal loans, searching for the lowest personal loan interest rates is usually a good place to start. 

Type of personal loan rate

What to consider

Fixed rate personal loan

·      Good for budgeting - stable payments from month to month

·      No risk of repayments increasing due to interest rate rises

·      Potential to miss out on savings from interest rate cuts

Variable rate personal loan

·      Tend to have more flexibility 

·      You will save money if lender interest rates fall

·      Risk of repayments increasing due to interest rate rises

You won’t just be paying interest to your lender - there are often other assorted fees and charges as well. When you compare personal loan rates, remember that an Australian personal loan with a low interest rate that charges high fees may ultimately turn out to be more expensive than a personal loan with a higher interest rate and lower fees. 

How to compare personal loan rates

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When you compare personal loans, check out the comparison rate to get better idea of a personal loan’s total cost, and work out which options are the cheap loans. This combines its interest rate and standard charges into a single percentage. 

However, a loan’s comparison rate may not take its nonstandard fees and other costs into account, nor any of the value-adding extra features or benefits that could help you further narrow down your shortlist of potential personal loan options. 

How long is a personal loan?

Type of personal loan

Average length of loan

What to consider

Shorter term personal loan

Under 12 months

·      Can be paid off more quickly

·      Monthly repayments may be higher

Typical personal loan

3 - 5 years

·      Lower interest rate than a credit card

·      May cost you in fees and/or interest

Longer term personal loan

7 – 10 years

·      More affordable monthly repayments

·      Pay more interest over time

Secured and unsecured personal loans

Do you own a car, a property, or some other valuable asset, and are you looking to save on a personal loan? By putting your asset up as collateral for a secured personal loan, you may be able to enjoy a lower interest rate, as there’s less risk involved for the lender. 

Pros of secured loans:

  1. Lower interest rates
  2. Seen as a lower risk to lenders
  3. Allows you to borrow a higher amount 

Cons of secured loans:

  1. Lender will claim security if you default
  2. Lenders may only accept newer items (cars) as a guarantee 

Unsecured personal loans require no additional security, making them viable options for borrowers who don’t have valuable assets available, though these loans tend to have higher interest rates due to the higher risk to Australian lenders.

Pros of unsecured car loans:

  1. Don’t risk losing your security if you default
  2. Application can be a simpler process 

Cons of unsecured car loans:

  1. Higher interest rates
  2. Smaller loan amount

How can you pay off your personal loan early?

One way to get your personal loan fully paid off sooner (and pay less in total interest) is to make extra repayments when you have some money available, such as when you get a tax refund, or if a rate cut leaves you with some extra cash left over in your budget. 

However, some Australian lenders would prefer that you stick to the agreed-upon repayment plan, and charge fees for exiting the loan early. These fees tend to be more common for fixed rate personal loans with prearranged repayment plans, though they are sometimes also found on variable rate personal loan offers too. 

Make sure getting out of debt early doesn’t end up costing you more than you expected. Australian Securities and Investments Commission (ASIC) has lots of information on personal loan fees.  

Personal loans with a redraw facility

While making extra repayments onto your Australian personal loan is all well and good, sometimes a financial emergency leaves you wishing you could put some of these extra payments back into your pocket. 

If you choose a personal loan that offers a redraw facility, when you’re ahead on your personal loan repayments, you’ll have the option to withdraw the surplus funds if required, subject to your lender’s terms and conditions. This can allow your extra cash to help you get closer to paying off your personal loan ahead of schedule, while still remaining accessible if you really need it. 

Refinance personal loans

If you’ve found a more competitive personal loan, or you’re looking to consolidate your debt, you may be considering refinancing your personal loan. 

Steps to refinance personal loans:

  1. Check your credit score as it may have changed while paying off your existing loan
  2. Compare personal loans and find a more competitive option
  3. Calculate refinancing costs (break fees, application fees etc.)
  4. Apply for the new personal loan
  5. Ensure your old loan is paid off

It’s important to note that if you’re taking out a personal loan to consolidate your debts (including other personal loans) from multiple lenders into a single loan, with one easy-to-manage repayment each month, not every lender offers refinance personal loans for debt consolidation – check the terms and conditions first. 

Where can I get a personal loan with bad credit?

Fair credit, or bad credit, can make it harder to find a lender who’s willing to give you a personal loan, but it doesn’t mean you won’t qualify. If you’re wondering where to get a personal loan with bad credit, there are many lenders across Australia and online who will consider applications from people with bad credit history. You can also apply specifically for bad credit history personal loans. Compare bad credit personal loans today. 

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Which is the best bank for personal loans?

Choosing the right provider for your personal loan is a subjective experience, based on your personal needs and credit history. There are many personal loan lenders across Australia, and you can seek out a personal loan with any of the big four banks, such as ANZ, Commbank, Westpac or NAB, as well as credit unions, mutual banks and peer to peer lenders. 

Compare Australian personal loans

You know what you want from your personal loan comparison. All you need to do now is find the Australian lender who’s offering the personal loan that matches up with what you need. 

Look through the selection of personal loans in Australia at RateCity and discover the ideal offer to help you turn your dreams into reality. 

Personal Loans Guide

RateCity's Personal Loans Guide provides you with tips and useful information to assist in your decision when purchasing a personal loan. Read the Personal Loan Guide. 

*The phrase ‘some of the best’ is not a recommendation or rating of products. This page compares a range of home loans from selected providers, not all products or providers are included in the comparison. No home loan is one size fits all. The best home loan for you will not be the best home loan for someone else. As a result, it's worth getting advice on whether a product is right for you before committing.

FAQs

It’s unusual for a lender to make a personal loan above $100,000, although there is no formal limit. As with all lending products, each lender sets its own policies, while each borrower is assessed on a case-by-case basis.

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