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Here’s how much that personal loan will cost you

Here’s how much that personal loan will cost you

Want to go on an epic holiday? Got a wedding to pay for? Been hit by a sudden medical bill?

If so, you might be thinking about taking out a personal loan – and wondering who’s offering the cheapest personal loans in Australia are right now.

But it’s not that simple.

First, the cheapest personal loan won’t necessarily be the best personal loan for your situation.

Second, you might not qualify for the cheapest personal loan.

Third, it might actually be better not to get the personal loan in the first place.

Smaller lenders have the lowest-rate personal loans

There are dozens of personal loan lenders in Australia, so it can be tough to keep track of who’s offering what.

The good news is that we’ve crunched the numbers for you. The average interest rate for all the personal loans listed on RateCity was 11.89 per cent at the end of February.

Here are some of the personal loans with the lowest interest rates in Australia:

LenderProductAdvertised rateComparison rate
Catalyst MoneyOnline Personal Loan Package5.25%5.89%
Illawarra Credit UnionOnline Personal Loan Package5.25%5.89%
G&C Mutual BankFair Rate Personal Loan Diamond5.99%6.20%
Credit Union SASpecial Fixed Rate Personal Loan5.99%6.26%
Community First Credit UnionHome Improvement Loan6.12%6.39%
SummerlandEquity Plus6.22%6.82%
Cairns PennySecured Personal Loan6.25%12.07%
First Option BankVIP Personal Loan6.44%6.68%
Police BankGreen Loan6.49%6.63%
Newcastle Permanent Building SocietyPersonal Loan Secured6.69%8.41%

Stronger credit history equals lower rate

Time for a reality check: a lot of borrowers aren’t able to qualify for low-rate personal loans.

Lenders are allowed to discriminate on the basis of credit history, which means they tend to offer the lowest interest rates to borrowers with the strongest credit history.

By contrast, you’re likely to be charged a higher interest rate if you’ve got a weaker credit history.

You can use the Personal Loan Marketplace to check your chance of approval and get personalised rate estimates. Don’t worry – it won’t affect your credit score.

Should you take out a personal loan?

Before comparing personal loans for holidays, weddings or medical bills, it’s worth asking whether a personal loan is in your best interests.

There’s no right or wrong answer: it all depends on your individual situation.

Remember, though, that when you take out a personal loan – even a low-rate personal loan – you’re effectively buying money.

For example, here’s how much a two-year, $10,000 personal loan would cost you:

Interest rateMonthly repaymentsTotal repayments
6.00%$443$10,637
8.50%$455$10,909
11.00%$466$11,186
13.50%$478$11,466
16.00%$490$11,751

With that in mind, it might be worth considering other options:

  • Could you delay your holiday so you can pay for it out of your savings?
  • Could you find ways to reduce the cost of your wedding?
  • Could you ask your medical provider to extend the deadline for your bill?

If you’re still interested in exploring your personal loan options, click the Personal Loan Marketplace button below.

CHECK YOUR CHANCE OF APPROVAL

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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