Compare Australian personal loans
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.
Unsecured Personal Loan - (Excellent Credit)
up to 10.89%
Low Rate Personal Loan - (Excellent Credit)
Find and compare Australian personal loans
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Discount Personal Loan
1 year to 7 years
Low Rate Personal Loan Secured (Excellent Credit)
1 year to 7 years
up to 9.99%
Low Rate Personal Loan - (Excellent Credit)
2 years to 3 years
Discounted Personal Loan
1 year to 10 years
up to 10.49%
Liberty Personal Loan (Excellent Credit History)
3 years to 7 years
Personal Loan - Excellent Credit
1 year to 7 years
Secured Fixed Standard Personal Loan
1 year to 5 years
Personal Loan Fixed
1 year to 7 years
1 year to 7 years
Latest personal loans news
New personal loans see the biggest fall in nearly 20 years
New personal lending nosedived by about 25 per cent in April, the biggest recorded monthly fall by the Australian Bureau of Statistics in nearly 20 years.
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|
|Debt consolidation||$10,000||3 years||10%||$323||$11,616||$1,616|
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.
Property Personal Finance Writer
A property and personal finance writer, Nick Bendel covers property, loans, credit cards, superannuation, and other bank products. Nick has previously written for The Adviser, Mortgage Business, Lifehacker, Business Insider, Yahoo Finance, and InvestorDaily, and loves getting elbow-deep in the latest ABS, APRA and RBA data.
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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.
The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.
However, people with bad credit histories can make debt consolidation work by following this three-step process:
- First, find a lender willing to give you a bad credit personal loan. This process will be simplified if you go through a finance broker or use a comparison website like RateCity.
- Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced.
- Third, instead of spending those savings, use them to pay off the new loan.
Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.
For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.
For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.
Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.
A bad credit personal loan is 'secured' when the borrower offers up an asset, such as a car or jewellery, as collateral or security. If the borrower fails to repay the loan, the lender can then seize the asset to recoup its losses.
Some lenders are able to approve applications with little documentation and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.
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.
In some instances, bad credit personal loans can help people with bad credit history to consolidate their debts, which can help make it easier for them to clear those debts. This is because the borrower might be able to consolidate several debts with higher interest rates (such as credit card loans) into one single debt with a lower interest rate and potentially fewer fees.
However, this strategy can backfire if the borrower spends the loaned funds instead of using it to repay the new loan. Another disadvantage of bad credit personal loans is that they have higher interest rates than regular personal loans.
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.
The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:
- The big four banks (ANZ, Commonwealth Bank, NAB and Westpac)
- Smaller banks (such as Bank of Queensland, Bendigo Bank and MyState)
- Mutual banks (such as Heritage Bank, Greater Bank and Newcastle Permanent)
- Credit unions (such as People’s Choice Credit Union, BCU and Community First Credit Union)
- Non-bank lenders (such as Pepper Money, Liberty and RACV)
- Peer-to-peer marketplaces (such as Harmoney, SocietyOne and RateSetter)
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.
It’s unusual for a lender to provide a personal loan of 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.