Need to cover a large expense, replace a car, renovate your home or manage an unexpected cost?
A personal loan may be one option worth exploring.
With different lenders, loan amounts, interest rates, fees and repayment terms available in Australia, finding the right option can take some research. Comparing the key features before applying can help you understand what you could pay and which type of loan may suit your needs.
Looking for a Personal Loan?
Personal loans allow eligible borrowers to borrow a set amount and repay it over an agreed period, usually with interest and fees.
Depending on the lender, personal loans may be available for things such as:
Car purchases
Home improvements
Large household expenses
Travel
Education and professional expenses
Debt consolidation
Other approved personal expenses
Loan amounts, rates, fees and eligibility requirements can vary between lenders.
What Types of Personal Loans Are Available?
Not every personal loan works the same way.
Secured Personal Loans
A secured loan is backed by an asset, such as a vehicle.
Because the lender has security over the asset, the loan can have different rates and conditions from an unsecured loan.
Before choosing this type of loan, check what happens if you cannot keep up with repayments.
Unsecured Personal Loans
An unsecured personal loan does not require an asset as security.
This can provide more flexibility, but the interest rate and fees may differ from secured options.
Always check the total cost rather than focusing only on the advertised rate.
Fixed-Rate Personal Loans
With a fixed interest rate, the rate generally stays the same during the agreed fixed period.
This can make repayments easier to plan because the interest component does not change during that period.
Variable-Rate Personal Loans
A variable rate can change over time.
If the rate changes, your repayments or the amount of interest you pay may also change. Consider whether your budget could handle higher repayments.
How Much Could a Personal Loan Cost?
This is where comparing loans becomes important.
Two loans can advertise different interest rates but have different fees and overall costs.
A comparison rate combines the interest rate with most standard fees and charges, making it useful when comparing similar loans. However, it is calculated using specific assumptions and may not represent the exact cost of your individual loan.
For example, when comparing personal loans, look at:
Interest Rate
How much interest is charged on the amount borrowed?
Comparison Rate
What does the loan cost when the interest rate and most standard fees are considered together?
Fees
Are there application, ongoing, administration, missed-payment or early-repayment fees?
Loan Term
How long will you be making repayments?
Repayment Amount
Can the regular repayment comfortably fit within your budget?
Don’t Just Look at the Lowest Rate
A lower advertised interest rate does not automatically mean a loan will have the lowest overall cost.
For example, one loan could have a lower interest rate but higher fees, while another could have a slightly higher rate and fewer fees.
This is why looking at the comparison rate and the full loan terms can provide a better picture of the potential cost.
What Can Affect Your Loan Options?
Lenders may consider your individual financial circumstances when assessing an application.
Factors can include:
Income
Regular expenses
Existing debts
Savings
Credit history
Requested loan amount
Loan purpose
Repayment ability
The interest rate advertised by a lender may not necessarily be the rate you receive. Moneysmart notes that lenders may consider factors such as your credit score, income, expenses and savings when determining the rate offered.
How to Compare Personal Loans Online
Searching online can make it easier to review different loan options before making an application.
Start by considering how much you need to borrow and how much you could reasonably repay.
Then compare:
- Loan Amount
Does the lender offer the amount you need?
- Interest Rate
Is the rate fixed or variable?
- Comparison Rate
How does the overall borrowing cost compare?
- Fees
Check application, ongoing, late-payment and other possible charges.
- Repayment Schedule
Can you manage weekly, fortnightly or monthly repayments?
- Loan Term
Would a shorter or longer term better fit your budget?
Using a loan calculator can also help estimate potential repayments, although calculator results are estimates and do not guarantee the amount or terms you may receive.
Before You Apply
Taking a few minutes to compare your options can make it easier to understand the total cost of borrowing.
Read the loan terms carefully and make sure you understand the interest rate, comparison rate, fees, repayment schedule and conditions.
It’s also worth remembering that applying for multiple loans without checking eligibility first may affect your credit profile.
Explore Personal Loan Options
Personal loans can differ significantly in their rates, fees, terms and eligibility requirements.
Whether you’re comparing Personal Loans, Online Personal Loans, Personal Loan Options or Personal Loan Comparison results, reviewing the key features first can help you understand the choices available.
Compare personal loan options and learn more about rates, fees and repayment terms before applying.