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Challenger lenders lead the way with personal loan interest rates

Challenger lenders lead the way with personal loan interest rates

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.

LenderProductAdvertised rateComparison rateUpfront fee
ANZFixed Rate Loan12.45%13.32%$150
NABUnsecured Personal Loan12.69%13.56%$150
Commonwealth BankFixed Rate Personal Loan12.99%13.86%$150
WestpacUnsecured Personal Loan12.99%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.

LenderProductAdvertised rateComparison rateUpfront fee
Illawarra Credit UnionOnline Personal Loan Package5.25%5.89%$200
G&C Mutual BankFair Rate Personal Loan – Diamond5.99%6.20%$150
Credit Union SASpecial Fixed Rate Personal Loan5.99%6.26%$195
Community First Credit UnionHome Improvement Loan6.12%6.39%$195
SummerlandEquity Plus Personal Loan6.22%6.82%$175
Cairns PennySecured Personal Loan6.25%12.07%$200
First Option BankVIP Personal Loan6.44%6.68%$175
Police BankGreen Loan6.49%6.63%$98
Newcastle PermanentPersonal Loan Secured6.69%8.41%$250
Bendigo BankSecured Green Personal Loan6.79%7.21%$150
Queensland Country Credit UnionReno Loan6.79%7.31%$120
Service OneEco Personal Loan Secured6.79%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 rateMonthly 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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This article was reviewed by Product Director Liron Nehmadi before it was published as part of RateCity's Fact Check process.

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