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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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Fact Checked -

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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Learn more about personal loans

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.

Can you refinance a $5000 personal loan?

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.

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.

Should I get a fixed or variable personal loan?

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.