Best personal loans for May 2020

Alison Cheung-15/05/2020- 3 min read

A lot has changed in our world over the past two months due to COVID-19, and it’s making a noticeable impact on the way we use money.

Australians are spending less on non-essentials, such as holidays and entertainment, and more on non-discretionary expenses, including groceries, medical costs and debt repayments, according to NAB research.

It’s not surprising, given that almost 600,000 people lost their jobs in April, according to new data from the Australian Bureau of Statistics.

And despite the official cash rate at a record low due to multiple rate cuts in the past year, Australians are also taking on less in short-term debt, with the value of new personal loan commitments declining by 8.2 per cent in March, according to the ABS.

It might not be the best time to take out a personal loan for some people. But if you’re in need of additional funds to get you through these tough economic times, it’s a good idea to compare the interest rates, fees and features on various personal loans before committing to one.

If you’re doing your research on what options are out there, RateCity has compiled some of the top-rated personal loans for May 2020.

(Rankings are correct at the time of publishing. Please note lenders may trade places on the list as interest rates and fees change and RateCity’s tracker reflects these movements.)

What are excellent credit personals loans?

Many lenders offer lower interest rates for people with better credit scores. These borrowers are seen to be reliable, so lenders want to do business with them.

If you’ve worked hard to achieve an excellent credit rating, you’re likely to secure a more competitive interest rate. Keep in mind your personal loan application isn’t guaranteed to be approved solely because of your excellent credit status, though your chances are higher.

Top five rated excellent credit personal loans

Here are the top five rated personal loans today for borrowers with an excellent credit score. The ratings assume an unsecured $20,000 loan on a 36-month loan term.

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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.

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.

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

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.

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.

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.

Many lenders offer online applications for personal loans, which can be convenient for borrowers who have busy lives. If you’re not confident your personal loan application will be approved, you may want to consider contacting the lender by email, live chat, phone, or by visiting a branch, to discuss your situation before applying.

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.

Personal loans with no credit checks are available and called ‘payday loans’. These are sometimes used as short-term solutions for cash-strapped Australians. They often carry higher interest rates and fees than regular personal loans, and individuals risk putting themselves into a worsened cycle of debt.

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

Proof of identity
Proof of residence
Proof of income
Details of assets (e.g. car, home)
Details of liabilities (e.g. credit cards, other loans)
Loan amount
Loan term

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.

Self-employed borrowers may be eligible for low doc personal loans, which require less documentation in their application process than many other personal loan options.

It’s important to remember that though low doc personal loans may require less paperwork, you may need to provide additional security, or pay a higher interest rate.

The advantages of personal loans are that they’re easier to obtain than mortgages and usually have lower interest rates than credit cards.

One disadvantage with personal loans is that you have to go through a formal application process, unlike when you borrow money on your credit card. Another disadvantage is that you’ll be charged a higher interest rate than if you borrowed the money as part of a mortgage.

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.