Challenger lenders lead the way with personal loan interest rates

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A collection of smaller lenders are offering personal loans with interest rates significantly lower than the big four banks are charging.

Depending on your credit rating, it’s possible to get a personal loan with a ‘5’ in front of it. However, the big four banks are charging interest rates in the 12s.

Lender Product Advertised rate Comparison rate Upfront fee
ANZ Fixed Rate Loan 12.45% 13.32% $150
NAB Unsecured Personal Loan 12.69% 13.56% $150
Commonwealth Bank Fixed Rate Personal Loan 12.99% 13.86% $150
Westpac Unsecured Personal Loan 12.99% 14.14% $250

Source: RateCity

Illawarra Credit Union offers one of Australia’s cheapest personal loans, with the Online Personal Loan Package priced at 5.25 per cent (comparison rate 5.89 per cent).

G&C Mutual Bank has a personal loan from as low as 5.99 per cent (comparison rate 6.20 per cent), as does Credit Union SA (comparison rate 6.26 per cent).

There are some lenders that offer personal loans with a ‘4’ in front of them, but these require you to invest the same amount of money into a term deposit as you borrow through the loan.

Lender Product Advertised rate Comparison rate Upfront fee
Illawarra Credit Union Online Personal Loan Package 5.25% 5.89% $200
G&C Mutual Bank Fair Rate Personal Loan – Diamond 5.99% 6.20% $150
Credit Union SA Special Fixed Rate Personal Loan 5.99% 6.26% $195
Community First Credit Union Home Improvement Loan 6.12% 6.39% $195
Summerland Equity Plus Personal Loan 6.22% 6.82% $175
Cairns Penny Secured Personal Loan 6.25% 12.07% $200
First Option Bank VIP Personal Loan 6.44% 6.68% $175
Police Bank Green Loan 6.49% 6.63% $98
Newcastle Permanent Personal Loan Secured 6.69% 8.41% $250
Bendigo Bank Secured Green Personal Loan 6.79% 7.21% $150
Queensland Country Credit Union Reno Loan 6.79% 7.31% $120
Service One Eco Personal Loan Secured 6.79% 7.39% $150

Source: RateCity

Not everyone can qualify for low-rate personal loans

While interest rates are important, they’re not the be all and end all when it comes to personal loans.

Other factors – such as fees, features and customer service – should also be considered when comparing personal loans.

Another point worth mentioning is that not all borrowers can qualify for a lender’s lowest interest rates.

Lenders usually reserve their lowest interest rates for borrowers with higher incomes and credit ratings, while imposing higher interest rates on borrowers with lower incomes and credit ratings.

So you can’t assume that you would be able to qualify for a low personal loan interest rate just because you’ve seen it advertised.

To make the process more transparent, RateCity created the Personal Loans Marketplace, which gives borrowers personalised rate estimates from multiple lenders.

How much does a personal loan cost?

Imagine you took out a $10,000 personal loan with a three-year term. Here’s how much you’d have to repay based on five different interest rate scenarios:

Interest rate Monthly repayments Total repayments
5% $300 $10,790
7% $309 $11,116
9% $318 $11,448
11% $327 $11,786
13% $337 $12,130
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