Whether it’s for a holiday, new furniture, a uni course or your wedding, personal loans let you pay for it now and repay over a set term. We compare personal loans from a range of lenders and explain the true cost, including fees, before you commit.
Personal Loan Types and Features
There are a number of different loan types and features available to you. Learn more below. We are here to help answer your questions when you’re ready.
Secured Loans
You provide collateral (such as the car or property) as security against the loan in case you can’t afford your repayments.
Lenders typically offer lower rates for secured loans (compared with unsecured loans) because there is less risk for them.
Unsecured Loans
No additional security (e.g. your car or property) is provided against the loan.
Instead the lender will rely on your credit score when they decide whether or not to approve you for the loan.
Interest rates can be higher than a secured loan and you might not be able to borrow as much.
Fixed Rate
Your interest rate and repayments will stay the same during the fixed term of your personal loan.
Variable Rate
As the name suggests, the interest rate can change over the life of the loan. This gives you flexibility, but can also leave you open to rate rises. These loans can offer more flexible features like unlimited additional repayments.
What Can Personal Loans Be Used For?
Personal loans are flexible, and people use them for many different things, for example:
- A car, motorbike, boat or caravan (see also our car loans page)
- Home improvements, repairs or new furniture
- A wedding, a holiday or other major life event
- Education costs, medical or dental bills
- Combining several smaller debts into one repayment
According to Moneysmart, personal loans are usually repaid over one to seven years. Also, if you need up to $2,000 for essentials, Moneysmart suggests checking whether you can get a no interest loan first.
How Rates and Fees Work
The rate you are offered may differ from the advertised rate. That’s because lenders look at your credit score, income, expenses and savings when they set it. In addition, a secured loan usually attracts a lower rate than an unsecured one, since the lender can sell the asset if repayments stop.
Fees matter just as much as the rate. Common charges include an establishment fee, a monthly account fee and, on some fixed-rate loans, a fee for repaying early. So before you sign, check the total amount you’ll repay over the whole term, not just the regular repayment.
What Is a Comparison Rate?
A comparison rate combines the interest rate with most fees and charges into a single percentage. As a result, it gives you a truer picture of the cost of a loan. For example, a loan with a low headline rate but high fees can end up with a higher comparison rate than a loan with a slightly higher rate and no fees. However, comparison rates are calculated on an example loan amount and term, so your actual cost can differ.
How a Personal Loan Affects Your Home Loan Borrowing Power
If you’re planning to buy a home in the next year or two, think carefully before taking out personal loans. When you apply for a home loan, lenders count the repayments on your existing debts, which reduces how much they’ll lend you. Even a modest personal loan can cut your borrowing capacity by much more than its balance.
For more on this, read why your borrowing capacity may have reduced and how HECS debt affects borrowing capacity, which works in a similar way. You can also try our borrowing power calculator. If a home purchase is on the horizon, talk to us first, because the order in which you borrow can make a real difference.
Alternatives to Consider
A personal loan isn’t always the cheapest option. Depending on your situation, you could consider:
- Debt consolidation: if you’re juggling several debts, our guide to debt consolidation in Australia explains the options and the risks.
- Using home loan equity: homeowners can sometimes fund renovations through a refinance, although spreading short-term costs over a long loan can mean paying more interest overall.
- Saving first: for smaller purchases, a few months of saving may avoid interest altogether.
We’re based in Bangor, NSW, in the Sutherland Shire, and help clients across Australia by phone and video.
Personal Loans FAQs
A secured loan usually has a lower rate, but the lender can take and sell the asset if you don’t repay. An unsecured loan puts no asset at risk but usually costs more. The right choice depends on what you’re buying and your circumstances.
Usually, yes. Variable-rate loans often allow extra repayments and early payout. Fixed-rate loans may charge a fee if you repay early, so check the terms before you sign.
Each application is recorded on your credit file. Moneysmart warns that applying for a lot of loans can hurt your credit score, so compare first and apply selectively.
Often it helps, because lenders count your personal loan repayments when working out your borrowing power. However, using your deposit to clear debt can also reduce what you can buy, so speak to us first.
The information on this page is general in nature and does not take into account your objectives, financial situation or needs. Lending criteria, fees and charges apply. Consider whether it is appropriate for you and speak to us for advice specific to your situation.
Need Some Help?
Not sure where to start? That’s exactly what we’re here for. Drop us a message and we will get back to you within one business day with clear, honest advice tailored to your situation.