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Would you be better off with a peer-to-peer personal loan from SocietyOne?

Posted: 21 December 2017 4:42 pm
personal loan

You could apply for up to $50,000 and repay it at a rate that is tailored to you.

This unsecured personal loan from SocietyOne works a little differently from the standard personal loans you're used to seeing from banks. Known as a peer-to-peer loan, SocietyOne's unsecured personal loan offers you a tailored rate which can be extremely competitive, and is based on your credit profile. Let's look at whether SocietyOne's innovative new lending model is right for you.

finder's 3 favourite features

What we love about this loan:

  • Personalised rate. The better a borrower you are, the lower your rate will be.
  • You can make your loan better. Your loan term affects the rate you will receive. If you opt for a shorter loan term, your rate might drop as well.
  • Rate quote. You can get an idea of what your rate might be without actually applying for the loan. This rate quote will not affect your credit score.

Not a lender

That's right. SocietyOne and other peer-to-peer lenders are not lenders per se. SocietyOne acts as an intermediary, approving loans for borrowers and then matching them with investors. Borrowers and investors are matched based on the investor's risk preferences. Different loan terms and borrower grades will result in different returns for the investor. Borrowers are approved based on their credit profile and the details they provide in their application.

Tailored rate

When you apply for a personal loan you will receive a rate based on your loan grade. The better your loan grade, the lower your interest rate. Your loan term also affects the rate you will receive. For example, Tier 1 borrowers who are applying for a loan with terms of between two and three years will receive a rate of between and , but the rate range changes to between and for Tier 1 borrowers who are applying for a five-year loan. Your loan grade is based on information such as your credit score, employment status, cash flow and the loan amount you request.

What about the fees?

The establishment you will pay is also dependent on your loan grade but all other fees are standard. SocietyOne charges no ongoing fees for its loans. The establishment fees are between and 4% p.a. for Tier 1 loans. To get an idea of the true cost of the loan, look at the comparison rate as it includes the fees as well as the rate. For example, the comparison rate for a Tier 1 loan with two to three-year terms is between and

How much and how long for?

So, the rates are tailored and competitive, but what about the loan itself? You can apply for a loan of between $5,000 and $50,000 from SocietyOne. The loan term is one feature that differs from the banks; instead of offering you a choice of loan terms between one and seven years, as is the standard, you can select loan terms of two, three or five years. As discussed above, these loan terms affect your interest rate, with five-year terms carrying higher interest rates than two- or three-year terms even for loans in the same loan grades. So, if you can afford the repayments on a shorter loan term, this is the way to go.

Better than a bank?

Peer-to-peer lenders such as SocietyOne are making their mark in the Australian lending market by offering an alternative way to borrow, but the question is, is it better? Comparing peer-to-peer personal loans to bank personal loans is tricky because the rates work differently. Bank rates are usually set in stone and hover between 10% p.a. and 16% p.a. for unsecured personal loans. Because you don't know what rate you will get until you apply for SocietyOne's personal loan, it can be tricky to compare it to bank personal loans.

SocietyOne acts as an intermediary, approving loans for borrowers and then matching them with investors.

However, Tier 1 and Tier 2 offer rate ranges that are better if not comparable to current rates for bank unsecured personal loans, and Tiers 3 and 4 offer rate ranges that are still on par with those being offered by banks. Looking beyond the rates, the loan amounts you can apply for (between $5,000 and $50,000) are on par with what is being offered by the banks. While you pay an establishment fee which starts from $595, there are no ongoing fees.

Not for everyone

This unsecured personal loan from SocietyOne can be a good option to consider, but like all personal loans, you need to make sure you're eligible. You also need to ensure it's suitable for your purpose. First, the eligibility criteria:

  • Australian citizen or permanent resident
  • 21 years or older
  • Earn more than $30,000
  • Have at least two years of good credit history
  • Not be in hardship with any other provider
  • No pending, current or previous bankruptcies
  • The loan is for you personally

SocietyOne offers unsecured personal loans, so you don't need to offer an asset to be approved and you can use the loan for a variety of purposes. These include debt consolidation, home renovation, a new car or something else.

About applying

If you want to apply, you can head to SocietyOne's site to get your rate. Getting an initial rate quote from SocietyOne will not impact your credit score. You'll need to provide details of the loan you want, such as how much you want to borrow, as well as some personal information. After you get your rate you can decide whether you want to fill out a full application. SocietyOne will review your application and if you're approved you can get your loan funded in 72 hours – this is when you receive your loan offer. If you accept this you will receive your funds within a minimum of 48 hours.

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