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Can you get a personal loan with no interest attached?

If you’re searching for a personal loan with a low interest rate, you might wonder whether it’s possible to get a personal loan that charges no interest at all. The thing is, lenders charge borrowers interest on the amount borrowed as a way to make money, so it’s unlikely you’ll find a standard personal loan with no interest attached.

Who offers loans with no interest attached?

While standard banks and lenders charge interest on their personal finance products, low-income earners may be eligible for interest free finance offered by Good Shepherd Australia.

Good Shepard Australia’s No Interest Loans (NILs) are available to individuals and families on low incomes who need to borrow money for essential goods and services. NILs is offered by 170 local community organisations in over 600 locations across Australia. You can locate a provider near you by searching on their website.

How can a no-interest personal loan be used?

NILs is a no-interest small loan that can be used to borrow up to $1500 on a loan term of 12 to 18 months. While there are no credit checks, NILS loans can only be used to pay for essential goods and services such as:

  • Household items, including furniture, fridges, washing machines, stoves, dryers, freezers and heaters
  • Medical and dental services
  • Education essentials such as laptops, tablets and textbooks
  • Car repairs and tyres

Who can get a no-interest personal loan?

To be eligible for NILs, applicants must: 

  • Have a Health Care Card or Pension Card, and/or earn less than $45,000 per year for individuals or $60,000 per year for couples or those with dependants
  • Be able to show they have the capacity to repay the loan

How can I get an interest-free personal loan?

If you qualify for a NILS personal loan, you can apply by taking the following steps: 

  1. Enquire online or by phone to discuss your situation and what you’ll need to apply
  2. Meet with a local NILs provider, bringing relevant documentation with you
  3. Wait for your application to be assessed
  4. Receive the outcome of your loan application and agree on repayment terms

If you find that you are ineligible for NILs, but are having trouble finding a competitive personal loan that’s available to you due to a suboptimal credit score, it may be worth putting in the work to improve it before applying for new finance. To get started, consider visiting RateCity’s credit score hub for a free credit score check and learn more. 

Additionally, if you are experiencing financial strain and need some help managing your debts, reach out to the National Debt Helpline for free financial counselling.

Are there any interest-free emergency loans?

The No Interest Loans Scheme (NILS) allows low-income borrowers to take out no-interest loans for up to $1500 to purchase essential goods and services.

There are also similar low-interest loan schemes available to borrowers in financial hardship who are having a tough time getting finance approved.

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.

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 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.

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.