Whether you’re planning a wedding, dreaming of a holiday or looking to consolidate debt, we can all use a helping hand every now and then. Learn about how personal loans work in Australia, who is eligible and how the new Australian credit reporting system will affect you.  

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How do Australian personal loans work? 

Taking out a personal loan in Australia works by allowing you to borrow money for a specific purpose over a set period of time. Personal loans work as most loans would and there are certain criteria that you have to meet, including having income to repay the debt.  
Key components of an Australian personal loan: 

Personal loan Element  About
Loan amount  Can start from $2,000 and some go up to $100,000 depending on its purpose. Smaller loans, called payday loans, are available but carry their own risks.  
Interest rate  The cost of borrowing the money which is charged as a percentage of the loan amount and applied to your regular repayments. Interest rates can be fixed or variable.  
Loan term  The length of your loan, typically 12 to 60 months.  
Loan type  Choose between a secured or unsecured loan.  
Repayment frequency  Weekly, fortnightly or monthly.  
Features Some personal loans offer features like the ability to make extra repayments, or an overdraft facility.  
Fees This can be anything from annual or monthly fees to fees charged when making extra repayments or repaying the loan early if it’s fixed.  


What can you use personal loans for? 

There are a few reasons you could take out a personal loan, including:

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

Debt consolidation personal loans can be a useful debt management tool. If you have more than one debt facility such as multiple credit card, 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.

How do you compare Australian personal loans? 

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.  

  • 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 was built with this in mind.
  • Calculators help you compare your loan options by showing how much a loan’s repayments may cost you depending on the amount you borrow and the interest rate. This is a great tool to use once you’ve narrowed down a few loan options to see which loan is the most affordable for you.  

How do you choose the right personal loan? 

The right personal loan for you depends on your finances and the type of loan you want. Your bank may not offer the best or cost effective loan. This is why doing your research is so important. The first thing you should do is figure out what you want from your loan. Your loan’s purpose is important because lenders may use this as a loan criteria. For example, some lenders are happy with you borrowing for a renovation, but not for a wedding.  
You then need to decide if you want a secured or unsecured loan as this will affect the cost, or the interest rate, on the loan. You also need to decide if you want a fixed or variable interest rate loan. 

Different types of personal loans

Secured vs unsecured personal loans

A secured loan has collateral as security on the loan, whereas an unsecured loan does not.  

  • Secured loans: With a secured personal loan, your financier will ask you to insure the loan using an asset that you own. This asset will be used to cover the personal loan amount if you default on your repayments.  

  • Unsecured loans: An unsecured loan is not secured by an asset, and so it represents a greater risk to your lender. With no insurance on your loan, they cannot recover their losses if you fail to meet your repayments. So lenders charge higher interest rates on unsecured personal loans in order to reduce their risk. These types of loans also come with stricter criteria, to ensure borrowers can meet their repayments. 

Fixed vs variable rate personal loans 

  • Fixed interest rate: Personal loans with fixed rates charge the same interest rate for the length of the loan. That means that you agree to pay a set amount of interest as part of the loan repayments each month. Regardless of whether your lender changes interest rates, your repayments will stay the same. This can be appealing as it keeps your expenses certain and  makes budgeting easier. However,  you could miss out on savings if your lender reduces their variable rates.
  • Variable interest rate: Personal loans with variable interest rates mean your repayments could change at any time. You could save money with a variable loan if there’s a rate cut, as your interest costs and repayments will fall. However, if your bank or lender raises their rates, your costs could rise. 

Once you know what your ideal loan is, you can begin your comparison use RateCity's personal loan repayment calculator to see what you can afford. Doing your own research is the best way to ensure you choose the right loan for your specific financial needs and budget.  

Can anyone get a Australian personal loan? 

Not everyone will be eligible for a personal loan in Australia. Eligibility criteria typically includes: 

  • Being 18 years or over 
  • Living in Australia 
  • Being an Australian citizen, permanent resident or holding an eligible visa 
  • Receiving regular income and/or being employed. Some lenders set minimum income requirements so be sure to read the fine print before applying
  • Good credit history 

If you have a poor credit score, you may find it harder to get loan approval. You also may be charged higher interest rates because you’re seen as a riskier borrower. This helps lenders cover their costs. Learn more about credit scores.

What documentation do you need for a Australian personal loan 

The number and type of documents a lender asks you for may depend on whether they have dealt with you before, your credit history and the information contained in your bank statements.

These may include:

  • Proof of identity - driver’s license, passport or Birth certificate  
  • Utility bills 
  • Proof of income such as pay slips or Centrelink benefits  
  • Bank statements 
  • Recent ATO tax notice of assessment or tax return 
  • Recent tax returns or financial statements 
  • Existing credit commitments and statements - credit card debt etc. 
  • If you’re applying for a personal loan for the purpose of purchasing a car, you might be asked to provide additional documentation relating to the car and its insurance policy.

Other factors to consider 

When deciding on a personal loan, it’s important to consider the following factors. 

  • Loan term: spreading your repayments across several years could lead to smaller weekly or monthly repayments. This will, however, increase the amount of interest you pay over time. 
  • Your credit provider: consider using ASIC’s professional register to check whether your lender is licensed. 
  • Fees: some loans will charge a range of fees. This is why comparison rates are helpful when choosing loans. A loan’s ‘comparison rate’ combines a loan's advertised interest rate with its standard fees and charges, giving you a more accurate idea of its overall cost. Just watch out for any extra fees and charges that aren’t included in the comparison rate. You should ask a lender whether any of these apply.  
  • Features: the bells and whistles will cost you. Adding features to your personal loan can increase the interest rate.  

What Australian personal loan can you afford 

Not sure what personal loan you can afford? Use our personal loan repayment calculator to see what loan amount and interest rate would suit your finances. If you're considering a variable rate personal loan and have a strict budget, it's wise to budget for a rate rise of up to 3 percentage points to ensure that you can afford repayments. 
Example of personal loan costs: 

Loan purpose  Loan amount  Loan term  Interest rate  Monthly repayments  Total cost  Total interest paid 
Holiday  $5,000   2 years 9%  $228  $5,482  $482 
Debt consolidation  $10,000   3 years  10% $323  $11,616  $1,616 
Wedding  $15,000   4 years  11% $388  $18,609  $3,609 
Renovations  $20,000   5 years  12% $445  $26,693 


Note: Loan repayments don’t include fees. 


Will my credit history affect my personal loan application? 

Your credit history is an important measuring tool for lenders in Australia to determine your loan eligibility and if you will be able to meet your repayments. Your credit report will not just show negative information, but positive too. For example, if you’ve been working to pay off your debt and improve your credit by making regular repayments on your credit card, this will be revealed.

Your credit history helps lenders to make a more informed decision about your reliability as a borrower. If you have bad credit, don’t despair. In Australia, a new and positive credit score reporting system is being rolling out. Comprehensive Credit Reporting will see additional ‘positive reporting’ factored in by the Credit Reporting Bodies in Australia. Read more here.  

If you’re still concerned about your credit history, you could speak with a finance broker. Finance brokers can organise loans on your behalf. They may be able to help you find lenders who specialise in bad debt. They won’t charge for the service; instead, they’ll earn a commission from the lender.  

Check the fees and charges 

Just as with all financial loans, lenders charge fees on loans to cover their costs and financial risk. Personal loans can come with fees and charges that include:

  • Starting fees 
  • Account keeping fees 
  • Early exit fees 
  • Administrative fees 
  • Late payment fees  
  • Redraw fees


When you’re comparing personal loans, look at ALL the associated fees and costs by reading the key facts and figures sheet for the product, and the product disclosure statement (PDS). Every loan is different, so you need to make sure you look at all fees and charges before signing on the dotted line. 


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.

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 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.

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 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 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.

What is an unsecured bad credit personal loan?

A bad credit personal loan is ‘unsecured’ when the borrower doesn’t offer up an asset, such as a car or jewellery, as collateral or security. Lenders generally charge higher interest rates on unsecured loans than secured loans.

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.

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.

Are there alternatives to $2000 loans?

If you need to borrow $2000 or less, alternatives to getting a personal loan or payday loan include using a credit card or the redraw facility of your home, car or personal loan.

Before you borrow $2000 on a credit card, remember that interest will continue being charged on what you owe until you clear your credit card balance. To minimise your interest, consider prioritising paying off your credit card.

Before you draw down $2000 in extra repayments from your home, car or personal loan using a redraw facility, note that fees and charges may apply, and drawing money from your loan may mean your loan will take longer to repay, costing you more in total interest.

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.

Which lenders offer bad credit personal loans?

Several dozen lenders offer bad credit personal loans in Australia. These are generally smaller lenders that aren’t household names.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.

What causes bad credit ratings/scores?

Failing to repay loans and bills will damage your credit score. So will falling behind on your repayments. Your credit score will also suffer if you apply for credit too often or have credit applications rejected.

How long does it take to get a bad credit personal loan?

In the best-case scenario, an application for a bad credit personal loan can be made within minutes and then be approved within 24 hours. However, if a lender needs more information or needs more time to verify the provided documents, the application process may take longer.

How are credit ratings/scores calculated?

Different credit reporting bodies may use different formulas to calculate credit scores. However, they use the same type of information: credit history and demographic profile.

They’re likely to look at how many credit applications you’ve made, which lender the applications were for, what purpose they were for, how much they were for and your repayment record. They’ll also look at your age and postcode. They’ll also look to see if you’ve had any bankruptcies or other relevant legal judgements against you.

Your score can change if your demographic profile changes or new information is added to your file (such as a new loan application) or existing information is removed from your file (i.e. because it has reached its expiry date).

What is bad credit?

A person is deemed to have ‘bad credit’ when they have a poor history of managing credit and repaying debts.

What is debt consolidation?

Debt consolidation is the process of rolling several old debts into one new debt, usually to save money or for the sake of convenience.