Compare some of the best Australian personal loans

A personal loan is a loan you take out from a lender for personal use. Typically this would be used for a specific purpose, such as buying a car, renovating your home or a wedding or other event. 

No matter what you’re using your loan for, there are a variety of options available from Australian lenders, but it’s important to consider what features and personal loan rates suit your situation before you apply so you don’t take on more debt than you can comfortably repay. 

You can use a personal loan for a number of different reasons, including:

• Debt consolidation
• Buying a new or used car
• Paying for a wedding
• Funding a holiday
• Paying school fees
• Paying medical bills
• Funding home renovations or home improvements

Debt consolidation personal loans may be a useful debt management tool. If you have more than one debt facility such as multiple credit cards, you could take out a personal loan to pay these off. You’ll then have only one debt at a lower interest rate to manage. That’s because personal loans charge lower interest rates than credit cards.

A personal loan through a reputable lender may also be cheaper than other lending options, such as taking out a car loan through a dealership, and allow you to budget your options in advance so you know the final outcome will match your financial goals. 

There are several types of personal loans you can choose between depending on the features and requirements you need. 

• Secured loans: Secured loans work by you offering an asset as security in exchange for lower fees and a lower interest rate. The lender uses this asset as security, which means that if you don’t make the agreed repayments the lender can take possession of the asset and sell it to cover the debt. A secured loan can also be accessed using the asset you are buying as collateral. There are restrictions around what assets can be used, such as most lenders will require the car to be less than five years old to guarantee its value.
• Unsecured loans: Unsecured loans don’t involve using an asset as security. They’re usually used for something like a holiday or a wedding when there isn’t a physical possession involved.
• Car loans: Fairly self-explanatory, a car loan is finance available through a banker, lender or car dealer for the purchase of a vehicle. Oftentimes car loans become an emotional choice made at the point of sale, so it’s important to think through your budget and requirements before you head to the dealership.
• Line of credit: Here you will receive access to a set credit limit, but you will only pay interest on the funds you use. This is a popular choice for debt consolidation or paying for renovations or other purchases that don’t have a set cost. This option will still allow you to be able to pay less interest than other debt measures, so it may be one way to get in control of your finances.
• Overdraft: This is very similar to an unsecured loan but will be attached to your everyday bank account or another transactional account. You will have a set amount you can withdraw over your existing funds in your account, giving you access to additional credit. 

Selecting the right type of loan for you will involve comparing the options and considering which loan product matches your personal situation. It will also depend heavily on your budget and the reason you need the loan. 

Things to consider when selecting your personal loan product

• Loan amount: Look at the minimum and maximum amounts a lender will let you apply for and whether it will cover your requirements.
• Loan term: Look at the minimum and maximum loan terms and how they would suit your financial situation. Usually personal loans are offered on terms between one and seven years.
• Fees: Whether they be upfront fees such as establishment fees or application fees or ongoing fees, everything will count towards the amount you have to repay. You could also be hit with early repayment fees if you want to pay the loan off early.
• Interest rate: Ensure you look at the different comparison rates, not just the advertised rate, and how it stacks up against other providers. You will also need to decide if you want to opt for a fixed rate or a variable interest rate personal loan. A fixed interest rate will stay the same for the agreed length of time, while a variable rate may fluctuate depending on the market. Generally speaking, it may be easier to budget with a fixed rate personal loan as the repayments will stay the same over the fixed period.
• Repayments: When you’re comparing loan products it’s important to look at the rate and repayment schedule and how that will work with your budgeting. This will also impact the amount you can borrow.
• Extra features: These may include the option to make additional repayments or a redraw facility. Whether these are offered will depend on the loan product and you should consider before applying if these features are important for you and how you wish to pay off your loan. If you think you may want to pay off the loan early, having these features may help you escape exit fees and other charges. 

Approval and Repayments

 Some lenders may give you an answer immediately while others could take several weeks to review your application. If you have completed an online application you will usually be able to see if it matches the lending criteria immediately. There are two forms of approval: full approval and conditional approval. 

• Conditional approval usually takes less time but is given pending more information from you to satisfy the eligibility criteria. This includes information such as additional payslips or documents relating to your assets or debts. Lenders may also ask for this information and not offer any conditional approval. This is to help them make a more informed lending decision.
• Full approval is given when you have supplied sufficient information for the lender to make a decision and the lender has approved you for the loan.

Once you have been fully approved, your loan can be funded in a number of ways depending on the type of loan it is. If you are using the loan to purchase an asset, such as a car, the lender may issue the funds directly to the seller, in much the same way as a mortgage works. If you are taking out an unsecured personal loan the funds will be deposited into your nominated account. Again, this process can be immediate or take a few days to clear. 

The next step is the repayments. You will usually be able to nominate your structure, whether that’s weekly, fortnightly or monthly repayments. If you have opted for a loan with additional and early repayment options you will be able to put in additional funds which will reduce the amount of interest you pay over the life of the loan. If this feature isn’t available to you, you will need to check with your lender for any extra fees that may occur if you wish to make extra repayments or pay the loan off early. 

Once the loan is paid in full, along with the interest charged, the loan will be closed. When you are getting close to this final step you may wish to call your lender to confirm the final amount so you can clear the whole debt in full and not be hit with any extra interest charges. 

If you’re looking for a personal loan to fund an overseas purchase, an Australian-based lender may not be able to assist you. But if the lender is global and has offices in the country you’re planning to purchase in, you may be able to work with them. 

If you’re taking out a personal loan for travel most banks will allow this as an option, but you will need to confirm your plans and ensure you’re ready to begin the repayments when they commence. You will usually need to tell your lender if you’ll be out of the country for a period of time anyway so they can monitor activity on your account. 

Australian lenders are held to strict standards, governed by bodies like ASIC and APRA, that ensure you cannot enter into more debt than you can afford to repay. Because of this, there are criteria and guidelines you will need to meet before you can be approved for a personal loan in Australia. These include:

• A good-excellent credit score. Your credit score will significantly impact your loan application, although there are options for borrowers who have poor credit history. You can check your credit rating before you apply for a loan so you have a good idea of what to expect before beginning the process. Visit RateCity’s credit score hub to access your free credit reports and credit scores within minutes through a soft credit check that will not impact your credit history.
• Proof of income. Lenders need to know you can pay off any debt you enter into, so you will need to prove you have regular income before they will approve a personal loan application.
• A suitable financial situation. Lenders cannot issue you credit without first considering your existing financial situation. That includes any other loans you have, credit cards or any additional factors that would impact your ability to repay a loan.
• You will also need to prove your identity and if you are on a visa or have permanent residency you will need to provide additional information about your situation. 

There are restrictions about what loan amounts lenders can provide and the interest rates and fees they can charge. Most personal loans have a minimum amount of at least $2000. To borrow less than $2000, you may need to look towards a payday loan or medium-amount loan, though be wary of the higher-than-average fees involved. Borrowers experiencing financial stress may also be able to apply for the No Interest Loan Scheme (NILS) for essential purchases.

The maximum borrowing amount for a personal loan may depend on the lender, though a maximum amount of between $50,000 and $100,000 is not uncommon. The maximum amount a lender will allow you to borrow may also depend on factors such as your credit score or credit rating, your income and expense, or what you use as security for the loan.

You can usually apply for a loan online, although you can opt to go into a branch or begin the process over the phone. Some lenders may have different documentation requirements, but here are some guidelines for what to expect:

• ID. You will need a form of photo ID such as a driver’s licence or passport to prove your identity.
• Proof of income. A lender will need to confirm you’re eligible to pay back whatever amount they lend you, so you will need to provide payslips. Depending on the lender this may be three to six months of payslips, bank statements or two years of tax returns if you’re self employed.
• Credit history. Your lender will do a credit check to decide if you’re eligible for a loan which will highlight any additional debt, loans or recent history of financial problems. You will likely need to provide documentation of any other loans you have or statements from credit cards and similar products.
• Additional information. As part of the application you will also need to provide information about what you are seeking a loan for and if you are applying for a secured loan you will need to provide information about the asset. You may also need to provide information about other financial products, including your superannuation or any savings, in some circumstance. 

For non-residents, it can be harder to secure a personal loan, but not impossible. Lenders may have restrictions on the amount of money you can borrow and you won’t be able to use a credit history from another country, but there are options. It’s likely your income requirements will be higher and lenders will also want to know your visa information as the loan will have to be repaid before you leave the country. 

Depending on what loan product you are looking at, you will also need to be on an eligible visa, including long-term visas 457, 475, 487 or 495. You will need to prove your employment status and show proof you are planning to stay in the country long-term to ensure a lender minimises the risk of providing you with a loan. You will also need to have an Australian bank account that the money can be paid into. 

When it comes to the best personal loan, there is no one-size-fits-all option. Some borrowers may define their best personal loan as charging the lowest interest rate, some may prefer personal loans that offer features, like making additional repayments, and some borrowers may want specific things from their lender, such as sustainability. 

Generally speaking, the best personal loan is the one that:

• Helps you achieve your financial goals;
• Charges you a competitive interest rate;
• Charges you little to no fees;
• Is with your ideal financial institution;
• Offers helpful loan features (if this is important to you); and
• Is best suited to your financial situation and budget.

The best way to figure out what personal loan may best suit you is to do your research, shop around and compare the most important aspects of a personal loan.

There are a few ways to compare personal loans and get information, like speaking to a bank or broker. Use comparison tools, such as tables and calculators, to find loan options that suit your needs and budget and to ensure you’re getting the most competitive deal and understand the full cost of the loan.

Comparison tables

Comparison tables help filter and narrow down personal loan options. You can compare interest rates and view features or fees attached to the loan. The RateCity personal loans marketplace allows you to view options from a wide range of lenders and look at the right option for you.

Personal Loan Calculators

RateCity's personal loan repayment calculator can provide you with an estimate to help you find the right loan for your budget. It will also help you get an idea of how much you can borrow depending on the loan term and repayment schedule, as well as the interest rate of your loan product.

Real Time Ratings

Real Time Ratings is RateCity’s world-first rating system that ranks personal loans based on your individual requirements. Each personal loan is given a score out of five, based on loan costs and flexibility. It then takes into consideration your ideal loan size, loan term, borrowing purpose and if you’re securing the loan, to give you a more tailor-made result.

Unlike other comparison pages which rank their products once or twice a year, Real Time Ratings results are calculated live, so they are as up to date as possible. Looking at the Real Time Ratings score may be one way to help you narrow down your shortlist of best personal loan options.