Cheap personal loans*
For many borrowers seeking personal loans, the question that’s ultimately at the back of their mind is “what’s the cheapest?”
When looking for the cheapest personal loan, you should compare:
- Interest rates
- Fees & charges
This will help you to work out which lenders will cover your expenses or consolidate your debts without costing more than you can afford. By looking at the features and benefits offered by different lenders, you can work out which cheap personal loans can provide the greatest value for your money.
What is a cheap personal loan rate?
If you’re specifically hunting for a cheap interest rate, you may want to look for one that is lower than average. This means a cheap personal loan rate could be 11 per cent or under.
However, it is important to remember that you don’t just pay interest on a personal loan – there are usually fees and charges involved as well, which can make a big difference to a loan’s total cost. A low-interest personal loan with high fees may cost more overall than a higher-interest personal loan with cheaper fees and charges.
Review comparison rates to find cheaper deals
One simple way to work out the approximate cost of different personal loans is to look at their comparison rates.
This percentage figure combines a personal loan’s advertised interest rate with its standard fees and charges, and can be used to help narrow down your shortlist of cheap personal loan options.
Keep in mind that some personal loans may also include nonstandard fees and other costs that aren’t included in its comparison rate. Also, to make sure you get great value from your personal loan as well as a cheap deal, check what extra features and benefits are offered by each lender.
What to look for in a cheap personal loan
When looking for a cheap personal loan, the main thing that will cost you in the long run is the extra interest you’ll need to pay back to your lender, so it’s worth looking for a personal loan with a low interest rate if possible.
Other costs to look out for that will determine whether your loan is the cheapest on the market for your financial needs are fees and charges, including:
- Loan approval fee
- Establishment fee
- Annual fee
- Administration fee
- Late payment fee
- Early Repayment Fee
- Default fee
Staying on top of your personal loan repayments is key to avoiding a lot of these major fees. However, you should always compare fees across your chosen cheapest personal loans, as there are loans that don’t charge upfront, annual and/or administration fees.
Fixed and variable interest rates
The next step for finding the cheapest personal loan rates is to work out whether you’d prefer your personal loan to have a fixed or variable interest rate.
- A fixed interest rate is set by your lender at the start of your personal loan term, and remains the same for the duration of your loan. This keeps your repayments the same for the entire term of your personal loan, and if these are cheap enough for you to easily afford, then organising your monthly budget should stay nice and simple.
- A variable interest rate, on the other hand, may be adjusted by your lender over the term of your personal loan, to better suit the current economic conditions. It’s possible that a rate cut could lower your repayments, providing you with an even cheaper deal on your personal loan. However, interest rate rises could make your initially cheap personal loan repayments much more expensive, so consider your options in relation to your financial situation.
Is it cheaper to pay off your personal loan early?
Short answer – yes, sometimes, though not always.
Longer answer – Making extra repayments onto a personal loan can help bring you closer to making an early exit from the loan. By completing your personal loan repayments ahead of the scheduled term, you may be able to ultimately pay less total interest on your loan, for a cheaper deal overall. So far, so good.
Things to consider when paying off your personal loan early:
- Some lenders will charge fees for making extra loan repayments or an early exit from your loan, to make up for the interest payments they’d be missing out on.
- These fees tend to be more common on fixed rate personal loans where you’re expected to stick to a fixed repayment schedule, though they are sometimes present in variable rate loan deals too.
- Check your personal loan’s terms and conditions, in case paying it off early ends up costing you more than you expected.
Does your cheap personal loan allow you to easily make extra repayments and get ahead on your loan? That’s great! Why not take this opportunity to add your spare cash to your personal loan and get it paid off as quickly as possible?
If you’re concerned that this could possibly leave you short of spare cash for emergencies where you could really need it, it may be worth considering a personal loan that offers a redraw facility.
When you get ahead in paying off one of these personal loans, the redraw facility will allow you to withdraw the surplus funds, subject to your lender’s terms and conditions, so you can enjoy greater financial flexibility while bringing you closer to making an early exit from your personal loan.
Secured or unsecured personal loans – what is cheaper?
On average, secured personal loans are the cheaper choice. If you already own a car, or have equity in property, you may be able to guarantee your personal loan against the value of your asset. These secured personal often have lower interest rates due to their reduced lender risk, allowing you to enjoy cheaper loan repayments.
If you don’t have access to an asset with enough value to secure your personal loan, or if you’d rather not risk potentially losing your asset if you’re unable to make your loan repayments, there is the option of an unsecured personal loan.
As these loans tend to involve greater lender risk, they’re more likely to have higher interest rates, resulting in more expensive repayments.
What if you want a personal loan, but don’t quite have enough money saved up for a full deposit?
Some lenders offer:
- Personal loans with a high Loan to Value Ratio (LVR), where you pay a smaller deposit up front, and borrow a greater percentage of your loan’s total value.
- 100% loans, where you pay no deposit at all, and instead borrow the full total.
Lenders typically consider these loans to be higher risks, and may charge higher interest rates as a result. Look at your finances and work out whether it would be cheaper to save up for a deposit, or to make higher monthly repayments on your personal loan.
If you’re currently juggling repayments for multiple different debts, and struggling to manage their combined interest costs, taking out a low interest personal loan for debt consolidation could ultimately prove to be a cheaper option, as you’d be paying just the one rate of interest. Plus, making just the one repayment per month can help make managing your budget so much easier.
However, not every personal loan can be used for debt consolidation, so remember to check with the lender first.
Are there 'no credit check' personal loans in Australia?
If you apply for a personal loan with a major lender such as Commbank, you can expect to undergo a credit history check. For those with bad credit this can be a daunting experience, especially as having a loan application rejected can negatively impact your credit score.
Having bad credit shouldn’t stop you from finding a cheap personal loan. There are a variety personal loans available that involve no credit check.
Where to find no credit check personal loans in Australia:
- Payday loans
- Peer-to-peer loans
- Secured no credit check personal loans
- Unsecured no credit check personal loan
However, you must consider the disadvantages of these types of loans, including higher interest rates and fees. For no credit check personal loan options like payday loans, it just takes one missed repayment to find yourself up to your neck in huge penalty fees, putting you in financial trouble.
Compare cheap personal loans
The cheapest personal loan isn’t always the personal loan that provides you with the most value, so before making your final decision, it’s worth comparing the personal loan offers from several different lenders at RateCity.
Once you find a personal loan that costs you less money, while providing you with features and benefits that suit your financial situation, you’ll be well on your way towards fulfilling those personal goals of yours.
*The phrase ‘some of the cheapest’ is not a recommendation or rating of products. This page compares a range of home loans from selected providers, not all products or providers are included in the comparison. No home loan is one size fits all. The best home loan for you will not be the best home loan for someone else. As a result, it's worth getting advice on whether a product is right for you before committing.