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What's new in personal loans for April 2021

With the recent announcement that the trans-Tasman travel bubble is scheduled to begin later this month, there’s no doubt many Aussies have already started planning a long-anticipated international getaway.

If you’ve got the travel itch but haven’t saved quite enough to cover your New Zealand holiday travel expenses, you might be interested in a holiday personal loan.

Borrowing money to pay for your trip could allow you to holiday now and pay it off later, on a loan term that works with your budget.

Personal lending for travel and holidays has continued to flatline since its notable fall at the beginning of the pandemic, according to lending indicators released by the Australian Bureau of Statistics.

The data shows that in the latest reference period of February 2021, the value of new loan commitments for fixed term personal lending rose 1.1 per cent overall, while new loan commitments for travel and holidays remained unchanged month-on-month.

But with quarantine-free travel on the horizon, and the International Monetary Fund recently upgrading Australia’s economic outlook, there could potentially be more demand for this kind of personal finance in the coming months.

If you need help deciding whether a personal loan is right for you, consider reaching out to a personal loan broker.

Some of Australia's best personal loans

While your credit score may affect what personal loan rate you can get, some of Australia's best personal loans right now may include the following, which match the comparison rate to the advertised rate:

Updated by Georgia Brown on April 9, 2021

What is a personal loan?

A personal loan is when you borrow a fixed amount of money for personal uses, which you repay with interest in regular instalments over a set period (usually 3-5 years). Common personal loan purposes include new car purchases, debt consolidation, holidays and more.

The minimum amount you can borrow with many personal loans is $1,000. The maximum amount you can borrow is often $50,000. With some personal loans, you may be able to borrow up to $100,000.

What is an interest rate?

The interest rate is the percentage extra on top of your loan amount you’ll need to pay your lender with each loan repayment. When comparing personal loans, looking for the lowest personal loan interest rates is often a good way to start. A low rate is likely to help save you money in the long run.

You should also pay attention to the different comparison rates listed. A comparison rate bundles up the personal loan’s interest rate with certain fees into one percentage figure. This is to help you compare apples with apples when doing your research on the cost of the loan.

 You won’t just be paying interest to your lender – personal loans often involve other fees and charges too.

What can I use a personal loan for?

When you’re making a personal loan comparison, it’s important to consider how you plan to use the loan.

Some of the types of personal loans that are available include:

Simply put, personal loans can be used for all sorts of things, from helping to repair debt to paying  school and university fees, legal costs, and even home improvement, improving your home's equity with extras such as solar panels, a pool, or even an electric battery to go off grid.

How do personal loans work?

After your personal loan application has been approved, you'll usually receive the money as one lump sum. You’ll need to pay this money back, plus interest, in weekly, fortnightly or monthly repayments. The main steps to get a personal loan are:

  1. Application: when you apply for a personal loan, you'll need to show proof of income, bank statements and personal identification. If you’re applying for a secured loan, you’ll also need to provide details of your security asset.
  2. Assessment: the lender will look at your personal finances to work out if you can afford the loan.
  3. Credit check: responsible Australian lenders perform credit checks whenever someone applies for a loan. These checks help lenders work out if you’re a responsible borrower. They may also help determine your personalised interest rate.
  4. Contract: once your application has been approved, you’ll be asked to sign a personal loan contract. This confirms the length of your loan, the type of loan, and that you understand the fees involved.
  5. Repayment: some personal loans will let you choose weekly, fortnightly or monthly repayments, to better suit your budget.

What types of personal loans are available?

Personal loans are available with fixed or variable interest rates. Fixed interest rates will stay the same, while variable rates may rise or fall. If your variable rate falls, you'll pay less interest with each repayment, but if rates rise, you'll pay more.
 
Fixed rates can make your budgeting simpler, as you’ll have the same rate for the whole loan. However, you may miss out on savings if variable rates fall.
 
Do you own a car, a property, or other valuable asset, and want to save on a personal loan? Using your asset to apply for a secured personal loan may let you enjoy a lower interest rate, as there’s less risk to the lender.
 
But if you don't own an asset that can secure a loan, or you don't want to risk losing your security if you can't afford the loan, unsecured personal loans are also available. Unsecured loans may come with higher interest rates.

Type of personal loan What to consider
Fixed rate personal loan
  • Good for budgeting - stable payments from month to month
  • No risk of repayments increasing due to interest rate rises
  • May miss out on savings from interest rate cuts
Variable rate personal loan
  • Tend to be more flexible
  • You can save money if interest rates fall
  • Repayments may increase if interest rates rise
Secured personal loan
  • Often lower interest rates
  • Seen as a lower risk to lenders as an asset is used as security against the loan
  • May allow you to borrow more money
  • For car loans - lender may only accept new models as security
Unsecured personal loan
  • Don’t risk losing your security if you default
  • Application can be simpler
  • May mean higher interest rates and/or a smaller loan amount than a secured loan

Can my credit score affect a personal loan? 

As with most financial products, when it comes to taking out a personal loan, your credit score can affect your borrowing power, choice of lenders and the rates available to you.

If you have an excellent credit score, there will typically be more lenders who are inclined to lend you money. This is because borrowers with excellent credit scores have a history of responsible credit behaviour, and are thus less of a risk to the lender than those with bad credit scores.

Similarly, an excellent credit score can often unlock more competitive interest rates and more flexibility in terms of the loan amount you may be approved for.

Keep in mind, however, that there are a number of other factors that contribute to the success of a personal loan application. Consider the eligibility criteria of each individual product before applying.

Borrowers with bad credit may still be able to find a personal loan product that works for them. It’s also worth thinking about the steps you can take to improve your credit score, such as working on existing debts and building your savings.

What interest rates and fees are involved with personal loans?

A personal loan with a low interest rate that charges high fees may turn out to be more expensive than a personal loan with a high interest rate and low fees.

Personal loan fees could include:

  • Upfront costs – establishment fees or application fees.
  • Ongoing fees – annual fees and/or monthly fees.
  • Late payment fees – if you miss a payment.
  • Early repayment fees – some lenders charge fees for making additional repayments.
  • Redraw fees – what you could be charged if you wish to access your extra repayments through a redraw facility. Not every personal loan has a redraw facility.

When you compare personal loans, check the comparison rate to get better idea of the loan’s total cost. The comparison rate combines a loan’s interest rate and standard charges into a single percentage.

 However, a loan’s comparison rate may not include its nonstandard fees and other costs. It’s also important to look for value-adding extra features or benefits that could help you further narrow down your personal loan shortlist. 

Note that some lenders may waive certain fees from time to time as a promotional offer. You may need to satisfy certain conditions to qualify for the fee waiver.

What difference does your credit score make on personal loans?

When it comes to getting a personal loan, your credit score can play an important role. Personal loan providers are known to assess a borrowers’ eligibility for loan approval and determine their offered interest rate based on the strength of their credit score, among other factors.

A credit score is a number given to an individual by a credit reporting bureau based on your credit history, and which helps to determine your creditworthiness. Essentially, a credit score helps a bank or lender to see if you’re likely to pay off a loan or make payments on time, often based off of your past payment behaviour, both positive and negative. Your credit score is a key part of how a credit provider determines whether to approve a personal loan, and what interest rate you'll receive, grading it in five tiers: excellent, very good, good, fair, and below average.

What this can mean for a personal loan application is that whether or not you have a 'Good' to 'Excellent' credit score could mean the difference in not only being approved, but also getting a competitive interest rate. As such, secured personal loan interest rates can start from 7.88% for those with 'Excellent' ratings, while lower credit scores may see higher personal loan rates to start with. 

Check your credit score now for free

Compare personal loan rates in Australia

The best personal loan rates will change, as banks and other lenders adjust their personal loan offers. It's always wise to research your options by comparing personal loans to find the best for you.

Why should I compare personal loan rates?

Comparing interest rates is a quick way to work out which personal loans are the most affordable. But the best personal loan for you may not be the cheapest.

It’s important to also look at a personal loan’s fees, features and benefits to work out if it could suit your needs, now and in the future.
 
At RateCity, you can compare personal loan rates from a wide variety of lenders in Australia, including the big four banks -- ANZ, Commonwealth Bank, NAB, and Westpac -- as well as plenty of other lenders in the country. Compare features and benefits side by side to make a more informed decision.

How much are personal loan repayments?

To work out your interest costs, it's a good idea to use a personal loan calculator. Check different repayment scenarios, with different interest rates, loan terms and loan amounts. Borrowing different amounts on different terms may result in different repayment amounts. RateCity's personal loan repayments calculator can help you understand how to benefit from the highest cost savings.
 
For example, here's how much a $20,000 personal loan might cost:

Loan term Interest rate Monthly repayments Total repayments
3 years 8% $627 $22,562
3 years 10% $645 $23,232
3 years 12% $664 $23,914
5 years 8% $406 $24,332
5 years 10% $425 $25,496
5 years 12% $445 $26,693

Source: MoneySmart

You’ll also need to think about upfront and ongoing fees. Upfront fees can range from $0 to $700, while ongoing fees can range from $0 to $15 per month.

How do I choose the best personal loan?

When you compare personal loans, consider which of the following will best suit your financial situation:

  • A variable or fixed interest rate
  • A secured or unsecured personal loan
  • The length of your loan
  • Whether you should apply for a bad credit personal loan
  • Whether you will make additional repayments
  • Whether you need a redraw facility

RateCity can help you quickly compare personal loan rates and how much time it will take to pay the loan back. 

What personal loan term should I choose?

Type of personal loan Average length of loan What to consider
Shorter term personal loan Under 12 months
  • Can be paid off more quickly
  • Monthly repayments may be higher
Typical personal loan 3 - 5 years
  • Lower interest rate than a credit card
  • May cost you in fees and interest
Longer term personal loan 7 - 10 years
  • More affordable monthly repayments
  • Pay more interest over time

How can I pay off my personal loan early?

One way to pay off your personal loan sooner is to make extra repayments. This could mean paying a bit more than the minimum each month. It could also mean adding a lump sum onto your loan when you can afford it, such as when you get a tax refund.

Additional repayments can reduce the principal amount you owe. This may reduce your future interest charges, or the cost of the loan, and bring you closer to paying off your loan early.

However, some lenders charge fees for making extra repayments or exiting a loan early. These fees are more common for fixed rate loans, though they sometimes appear on variable rate loans too. Before you pay off a personal loan early, make sure this won’t cost you more than you expect.

Can I get a personal loan with a redraw facility?

Making extra repayments can help you get ahead on your personal loan, but may leave you short on savings in your bank account. If your money is tied up in a personal loan, you may struggle to afford car repairs, surprise medical bills, or urgent travel expenses.

With a personal loan redraw facility, you can withdraw your extra repayments (like a home loan redraw), subject to terms and conditions. This can be handy if you want to pay less interest on your personal loan, but still want access to your money.

Keep in mind that not all personal loans come with redraw facilities, and those that do may charge redraw fees.

Can I refinance a personal loan?

Even the best personal loan rates can change. If you find a more competitive personal loan, or you want to consolidate your debt, you could refinance your personal loan. To refinance a personal loan, follow these steps:

  1. Check your credit score, as it may have changed while paying off your existing loan
  2. Compare personal loans to find a more competitive option
  3. Calculate refinancing costs (break fees, application fees etc.)
  4. Apply for the new personal loan
  5. Ensure your old loan is paid off

You could refinance a personal loan to consolidate other debts. These could include outstanding credit cards, or even other personal loans. Debt consolidation can make your budget easier to manage, as you’ll have just one repayment to think about each month. Not every lender offers personal loans for debt consolidation, so check the terms and conditions first.

How do I apply for a personal loan?

To apply for a personal loan, most lenders will require that you:

  • are at least 18 years old
  • are an Australian citizen, permanent resident or have a valid visa
  • are employed or receive regular income
  • earn a minimum income (dependent on lender)
  • have a good credit rating

When you make a personal loan application, you’ll typically need to provide:

  • Proof of identity (driver’s licence, passport etc.)
  • Proof of income and employment (payslips, tax information)
  • Details of any other financial commitments
  • Details of additional assets (particularly for secured loans)

Where can I get a personal loan with bad credit?

If you have a history of borrowing and repaying money on time, you should have a good credit score. But if you've had money trouble in the past, you may have a bad credit score.

If you have bad credit, or even fair credit, you may find it harder to get a personal loan. Some specialist lenders offer bad credit personal loans, but these loans often have higher interest rates and fees.

If you have bad credit and are struggling with debt, you can contact the National Debt Helpline on 1800 007 007 to speak with a free financial counsellor.

Which is the best bank for personal loans?

Personal loans are available from Australia’s big four banks (ANZ, Commonwealth Bank, Westpac or NAB) and from the country's smaller banks, too. You can also apply for personal loans from credit unions, mutual banks and peer to peer lenders.

The best choice for you will depend on your financial situation, personal needs and your credit history.

It’s important to compare personal loans from different banks and other lenders before you apply. Look for a loan that you’re confident you can afford, and offers features that suit your needs. You should also make sure you satisfy your bank’s lending criteria before applying.

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Frequently asked questions

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 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.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

How long does it take to get a $5000 loan?

Depending on the lender, personal loans and medium-amount loans for $5000 can sometimes be approved in under an hour, and give you access to the money the same day. Other loans may take 24 hours or longer to assess your application, and you may not get the money for a few days.

How long are $3000 loans?

Medium amount loans can be repaid between 16 days and 2 years. Many personal loans have terms between 1 year and 5 years, though some are as short as 6 months while others last for 10 years.

Generally, the shorter a loan’s term, the more expensive your regular repayments may be, but the less total interest you’ll pay. Loans with longer terms mean more affordable repayments, but more interest charges over the full term.

Do $4000 loans have no credit checks?

Many medium amount loans for $4000 have no credit checks and are instead assessed based on your current ability to repay the loan, rather than by looking at your credit history. While these loans can appear attractive to bad credit borrowers, it’s important to remember that they often have high fees and can be costlier than other options.

Personal loans for $4000 are more likely to have longer loan terms and will require a credit check as part of the application process. Bad credit borrowers may see their $4000 loan applications declined or have to pay higher interest rates than good credit borrowers.

Can I get a $4000 personal loan if I’m unemployed or on Centrelink?

Before most providers of personal loans or medium amount loans will approve an application, they’ll want to know you can afford the loan’s repayments on your current income without ending up in financial stress. Several lenders don’t count Centrelink benefits when assessing a borrower’s income for this purpose, so these borrowers may find it more difficult to be approved for a loan.

If you’re unemployed, self-employed, or if more than 50% of your income come from Centrelink, consider contacting a potential lender before applying to find out whether they accept borrowers on Centrelink.

Can you pay off a quick loan early?

Many lenders will allow you to make extra repayments onto a quick personal loan when you can afford them, or even exit the loan early, which can help reduce the total interest you are charged. Be sure to check your quick loan’s terms and conditions, as some lenders charge early exit fees for paying off a loan ahead of schedule.

Where can I get a personal loan?

The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:

There are three main ways to access personal loans. You can go through a comparison website, such as RateCity. You can use a finance broker. Or you can directly contact the lender.

What interest rates are charged for personal loans?

Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.

For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.

For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.

Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.

What are the pros and cons of personal loans?

The advantages of personal loans are that they’re easier to obtain than mortgages and usually have lower interest rates than credit cards.

One disadvantage with personal loans is that you have to go through a formal application process, unlike when you borrow money on your credit card. Another disadvantage is that you’ll be charged a higher interest rate than if you borrowed the money as part of a mortgage.

How are personal loans regulated?

Personal lenders in Australia are regulated by ASIC (the Australian Securities & Investments Commission) and must follow responsible lending rules. That means they can’t lend money without making “reasonable inquiries” about a borrower’s financial situation and ensuring the loan is “not unsuitable” for them.

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.

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 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.

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.

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.