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What’s new in personal loans in July 2021

The latest Commonwealth Bank (CBA) Household Spending Intentions report revealed that increases in home buying, education, and health & fitness spending intentions for May 2021 reflect continued economic recovery in Australia.

However, while travel spending intentions are understandably significantly higher than 2020 levels (when almost all travel was shut down), the numbers continue to track lower than 2019. According to CBA, this reflects the lasting impact of the closure of international borders.

Meanwhile, personal lending for the purpose of travel and holidays has continued to flatline, according to the latest lending indicators released this month by the Australian Bureau of Statistics (ABS).

Domestic travel may still be on the cards, however, and Symple Loans has promised to sweeten the deal for those looking to finance their trip with its announcement of a new partnership with Qantas Frequent Flyer. The partnership will allow Symple Loans customers to earn 1 Qantas Point per $1 borrowed, up to 50,000 Qantas Points, when approved for a personal loan.

Symple Loans’ excellent credit personal loan has rates starting from 5.75% (6.47% comparison rate), with no application fees and no security required.

Some of Australia's best personal loans

While your credit score may affect what personal loan rate you can get, some of Australia's best personal loans right now may include the following:

Updated by Georgia Brown on July 5, 2021

What is a personal loan?

A personal loan is a credit product that allows you to borrow a certain amount of money from a lender for a specific personal use. The borrower then repays the loan amount, plus interest, over a predetermined amount of time.

What can I use a personal loan for?

Personal loans can be used for a wide variety of purposes, from helping to get on top of existing debt to paying for university fees, legal costs and home improvement projects.

When you’re making a personal loan comparison, it’s important to consider how you plan to use the loan.

Some of the types of personal loans that are available include:

What types of personal loans are there?

To get started with your comparison, it’s worth figuring out what type of personal loan may fit your needs. Personal loans are split between two main categories – secured and unsecured.

A secured personal loan is a loan that’s secured by an asset, such a car, which is used as collateral for the money borrowed. An unsecured personal loan doesn’t have an asset attached.

Secured loans often have lower interest rates than unsecured loans as lenders consider them to be less of a risk. You may also be able to borrow more with a secured loan than with an unsecured loan.

Car loans

A car loan is a kind of personal loan that is often secured by the car itself. When it comes to used cars, however, lenders typically require the car to be under a certain age to qualify for a secured car loan. If the car that is being purchased doesn’t meet this requirement, the borrower may need to take out an unsecured car loan, or alternatively secure the loan on another asset. Whether the car you are buying is considered new or used will often depend on the lender, as many will classify cars as new until they are two to three years old.

What features should I consider when choosing a personal loan?

There are many different features to consider when choosing a personal loan. Comparing each feature carefully can assist you with finding the right product for you – because what’s best for one person may not be what’s best for someone else.

Interest rate

For many, comparing interest rates is the first step in their personal loan search. And it makes sense, as the loan’s interest rate will largely determine how much you pay in interest over the life of the loan. 

But first, you’ll need to decide between fixed or variable interest for your personal loan rate. A fixed interest rate will remain the same throughout the life of the loan, whereas a variable interest rate can fluctuate with the market. Generally speaking, a fixed rate loan can be easier to manage as the repayments will remain the same for the duration of the loan term. If you opt for a variable rate loan, it’s important to allow some breathing room in your budget to allow for potential rate rises.

Comparison rate

When comparing personal loan rates, remember that the lowest interest rate doesn’t always amount to the cheapest product. That’s because interest rates don’t factor in fees, which can really add to the total cost of the loan. This is where the comparison rate comes in handy, as it includes both the interest rate and the main fees payable, which can give you a better idea of the loan’s total cost.

Loan term

The amount of time you have to pay off your loan plus interest and applicable fees is determined by the length of the loan term. Personal loans typically have terms from one to five years, but some lenders offer loan terms up to seven years, and sometimes longer.

When deciding on a loan term for your personal loan, keep in mind that typically the longer the term, the lower the repayments - but the more you’ll likely pay in interest charges. Shorter loan terms may have more expensive repayments, but you’ll pay your loan off quicker and in turn spend less on interest charges.

Extra features

Different personal loans may offer extra features that could be important to you and how you pay off your loan. Some of these include:

  • Extra repayments – One way to pay off your personal loan sooner is to make extra repayments. However, not all lenders will allow you to make additional repayments, and some may charge a fee, while others may offer unlimited extra repayments.
  • A redraw facility – A personal loan with a redraw facility will allow you to withdraw extra repayments you’ve made. This can be handy if you want to pay less interest on your personal loan, but still want access to your money. Keep in mind that not all personal loans come with redraw facilities, and those that do may charge redraw fees.

Fees

The types of fees you may be charged for your personal loan will differ from one lender to the next. Some of these may include:

  • Upfront costs (e.g., establishment fees or application fees)
  • Ongoing fees (e.g., annual fees and/or monthly fees)
  • Late payment fees
  • Extra repayment fees
  • Early repayment fees/exit fees
  • Redraw fees

Can my credit score affect my personal loan?

As with most financial products, when it comes to taking out a personal loan, your credit score can affect your borrowing power, choice of lenders and the rates available to you.

If you have an excellent credit history, there will typically be more lenders who are inclined to lend you money. This is because borrowers with excellent credit scores have a history of responsible credit behaviour and are thus less of a risk to the lender than those with bad credit scores.

Similarly, an excellent credit score can often unlock more competitive interest rates and more flexibility in terms of the loan amount you may be approved for.

Keep in mind, however, that there are a number of other factors that contribute to the success of a personal loan application. Consider the eligibility criteria of each individual product before applying.

Borrowers with bad credit may still be able to find a personal loan product that works for them. It’s also worth thinking about the steps you can take to improve your credit score, such as working on existing debts and building your savings.

How do you apply for a personal loan?

  1. Check your credit score: Knowing what your credit score is can help give you a better understanding of which loan products and interest rates might be available to you. You can visit RateCity’s credit score hub to access your score within minutes.
  2. Assess your budget: Consider using RateCity’s personal loan calculator to get an estimate of your loan repayments and ensure they’ll fit comfortably within your budget. This could help you make an informed decision on how much you can afford to borrow and increase your chances of approval.
  3. Search and compare: RateCity’s comparison tables allow you to easily compare personal loans from a wide range of lenders, so you can find one that best suits your individual needs.
  4. Check the lending criteria: Once you have compiled a shortlist of your preferred personal loan products, check to see whether you meet all of the eligibility requirements in order to avoid having your application rejected.
  5. Prepare your application: When you’ve decided on a personal loan that best suits your needs, it’s time to complete your application. Depending on the lender, you may have the option to submit your application online or at a local branch. It’s a good idea to have all of your required documentation ready before you get started.
  6. Submit your application and await a decision: After submitting the information required, it’s time to await a response from the lender.

How can I compare personal loans on RateCity?

To take the hassle out of shopping for a personal loan, RateCity has a number of tools that may be useful to you.

Personal loan comparison table 

A personal loan comparison table, like the one on this page, can be a helpful tool when narrowing down your options. You can search by loan amount and loan term and use the filters to find products that may be more suited to your needs.

Personal loan calculator

RateCity’s personal loan calculator can give you an estimate of how much your personal loan repayments may cost based on the amount you’d like to borrow, your preferred loan term and interest rate. It can also provide you with an estimate of the total interest payable and total amount payable based on weekly, fortnightly or monthly repayments.

Real Time Ratings

Real Time Ratings is a system that ranks personal loans based on your own individual requirements. It gives each personal loan a score out of five stars, based on loan costs and flexibility, in real time as you use the site.

For information specific to your personal financial situation, consider reaching out to a personal loan broker or financial adviser.

Frequently asked questions

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

How are personal loans regulated?

Personal lenders in Australia are regulated by ASIC (the Australian Securities & Investments Commission) and must follow responsible lending rules. That means they can’t lend money without making “reasonable inquiries” about a borrower’s financial situation and ensuring the loan is “not unsuitable” for them.

What are the pros and cons of personal loans?

The advantages of personal loans are that they’re easier to obtain than mortgages and usually have lower interest rates than credit cards.

One disadvantage with personal loans is that you have to go through a formal application process, unlike when you borrow money on your credit card. Another disadvantage is that you’ll be charged a higher interest rate than if you borrowed the money as part of a mortgage.

Can I get a personal loan if I receive Centrelink payments?

It is hard, but not impossible, to qualify for a personal loan if you receive Centrelink payments.

Some lenders won’t lend money to people who are on welfare. However, other lenders will simply consider Centrelink payments as another factor to weigh up when they assess a person’s capacity to repay a loan. You should check with any prospective lender about their criteria before making a personal loan application.

Where can I get a personal loan?

The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:

There are three main ways to access personal loans. You can go through a comparison website, such as RateCity. You can use a finance broker. Or you can directly contact the lender.

How long do personal loans take?

Depending on the lender, some personal loan applications can be approved in as little as one hour, or you may need to wait until the next business day. If approved, you may receive your money on the same day, the next business day, or within the week.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.

Can I get a bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.

What do credit scores have to do with personal loan interest rates?

There is a strong link between credit scores and personal loan interest rates because many lenders use credit scores to help decide what interest rates to offer to potential borrowers.

If you have a higher credit score, lenders will probably classify you as a lower-risk borrower. That means they’ll be keen to win your business, so they may offer you a lower interest rate if you apply for a personal loan.

If you have a lower credit score, lenders will probably classify you as a higher-risk borrower. That means they might be concerned about you defaulting on the loan and costing them money. As a result, they might protect themselves by charging you a higher interest rate.