Best personal loans*
If there was one lender who offered The Best personal loan, bar none, then there’d be no need for personal loan comparison websites like RateCity – our job would be done for us! But because you have a range of personal loan options to choose from, such as different interest rates, terms and conditions, then the best personal loan for you is the one that perfectly fits your unique financial situation.
To work out which lender can provide the best personal loan for your household, whether you’re buying a car, paying for a holiday or consolidating your debts, it’s worth comparing the available options at RateCity, and learning more about the features and benefits they offer.
Not everyone takes out a personal loan to cover a large expense, like a wedding or a holiday. If you’ve borrowed money from multiple sources at different interest rates, and are juggling multiple repayments each month, sometimes the simplest option is to take out a personal loan to clear these smaller debts, and just make the one repayment per month to help keep your finances easy to manage. Just remember that not all personal loans can be used for debt consolidation, so it’s worth checking with your lender first.
Comparing interest rates
While it makes sense that the best personal loans can usually be found among the options with the lowest advertised interest rates, that may not be the whole story. A low-interest personal loan that also charges high fees may ultimately turn out to be the second-best option in terms of total cost when compared with a higher-interest personal loan with lower fees and charges.
As well as looking at interest rates, it’s usually also worth looking at the Comparison Rates for your personal loan options. Comparison Rates combine each loan’s advertised interest rate with its standard fees and charges, and express the total as a single percentage. You can use the Comparison Rate to get a more accurate idea of how much different personal loans could ultimately end up costing you.
It’s also worth taking a closer look at the best personal loan options after you’ve narrowed down your selection with the comparison rate. Some personal loans may have nonstandard fees and other costs that aren’t expressed in their comparison rate, or may come with extra features and benefits that could influence your final decision.
Fixed vs variable interest rates
What’s more important to you in a personal loan - making steady progress towards your final goal of getting your loan paid off, or enjoying greater flexibility around how you make your repayments?
A fixed interest rate on a personal loan is set at the beginning of its term, and will remain in place until it ends. Regardless of whether economic conditions have your lender raising its rates left and right, you’ll still be paying the same amount of principal and interest back on your personal loan every month until it’s fully paid off. This simplicity can prove very helpful when organising your monthly budget, as your repayments will be the same every month.
A variable interest rate may be raised or lowered by your lender over the lifetime of your personal loan. If rates drop, your repayments may drop with them, potentially leaving you with extra savings in your budget. But if rates rise, you could find yourself having to pay more than you expected for your personal loan. Variable rate personal loans are also more likely to offer greater flexibility around their repayment terms, providing more options for repaying your loan, rather than locking you into a fixed term of pre-set monthly repayments.
Extra repayments and early exits
Making extra payments on your personal loan when you have some extra money to spare can get you ahead of your repayment schedule, and bring you closer to exiting your loan early. This can ultimately mean paying less total interest over the lifetime of your loan, saving you a little extra money.
However, some lenders charge early exit and extra repayment fees, to help make up for the extra interest payments they’ve be missing out on if you complete your loan term early. These charges are more commonly found in fixed rate personal loan arrangements, where you’re expected to follow a set payment plan, though some lenders also charge similar fees for variable rate personal loans. Be sure to check your lender’s terms and conditions if you’re thinking of trying to save some money by paying off your personal loan early, so it doesn’t end up costing you more than you expected.
While the idea of getting ahead on your personal loan repayments may sound appealing, you may feel a bit hesitant about sinking your spare cash into paying off your personal loan. What if there was an emergency and you had no extra money available to cover it?
If your lender offers a personal loan that features a redraw facility, you may be able to enjoy the best of both worlds. You’ll be able to pay extra money onto your personal loan and get well ahead on your repayments, and also have the option to withdraw this extra money from your loan if required, subject to your lender’s terms and conditions.
Secured and Unsecured personal loans
A Secured personal loan is where you borrow money from a lender, using a valuable asset you already own as collateral. This asset could be a car, equity in a property, or some other item. If you default on your repayments, the lender seizes your asset to recover its loss. Secured personal loans often have lower interest rates, as they are perceived as less risky to lenders. Many car loans are secured loans, where the borrower puts up the value of the car they’re buying as security.
If you don’t have access to an asset with enough value to cover your personal loan, or if you’d prefer not to put your valuable asset at risk as collateral, your best option could be to take out an Unsecured personal loan. However, because these loans are considered to be riskier options, they tend to come with higher interest rates.
Are you a bit short of savings for a personal loan’s deposit? One option could be to look into a personal loan with a high Loan to Value Ratio (LVR), where you pay a smaller deposit up front and borrow a greater percentage of your total instead. Some lenders also have 100% loans available, where you borrow the full loan amount and pay no deposit upfront. These loans tend to have higher interest rates due to their higher lender risk, so it’s worth considering whether making higher repayments or saving up a deposit would be best for your finances.
Compare the best personal loans
Once you have a better idea of which are the best personal loan options for your financial situation, it’s time to start comparing the personal loans on the market to find the one you want.
At RateCity, you can compare interest and comparison rates, and also search for the personal loan features that are most important to you, so you can make the best decision when the time comes to make your choice.
*The phrase ‘some of the best’ is not a recommendation or rating of products. This page compares a range of personal loans from selected providers, not all products or providers are included in the comparison. No personal loan is one size fits all. The best personal loan for you will not be the best personal loan for someone else. As a result, it's worth getting advice on whether a product is right for you before committing.