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.

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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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.

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.

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 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.

What is a personal loan?

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.

What do credit scores have to do with personal loan interest rates?

There is a strong link between credit scores and personal loan interest rates because many lenders use credit scores to help decide what interest rates to offer to potential borrowers.

If you have a higher credit score, lenders will probably classify you as a lower-risk borrower. That means they’ll be keen to win your business, so they may offer you a lower interest rate if you apply for a personal loan.

If you have a lower credit score, lenders will probably classify you as a higher-risk borrower. That means they might be concerned about you defaulting on the loan and costing them money. As a result, they might protect themselves by charging you a higher interest rate.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

Do student personal loans require security?

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.

What is an unsecured bad credit personal loan?

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.

Can I get a bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.