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There is no single cheap personal loan that suits every borrower. While the lowest interest rate makes your loan cheaper there are so many other factors you need to look at including fees and future rate changes. Keep in mind that we don't compare every product in the market, but we hope that our tools and information will allow you to compare your options and find the cheapest personal loan for you.
If you're in the market for a personal loan, it is always important to consider the true cost of the loan. In this guide, we explain what makes a loan competitive, the cost of different loan types and what else to consider before you apply.
|Harmoney Unsecured Personal Loan||7.79% p.a. comparison rate. Tailored rate based on credit score.|
|SocietyOne Unsecured Personal Loan||6.99% p.a. comparison rate. Lower interest rates for borrowers with good credit.|
|HSBC Personal Loan||9.06% p.a. comparison rate. HSBC offers personal loans with a tailored rate based on your credit history.|
|NOW Finance Personal Loan||8.57% p.a. comparison rate. A cheap personal loan that gives you your own dedicated account manager.|
This is relative to the type of loan you require since interest rates can vary significantly between different types of loans. For example, a secured car loan will generally have lower rates than an unsecured personal loan.
Knowing what else to look for in a cheap personal loan is also important because the actual cost of a loan is determined by more than just the interest rate. Before applying for a personal loan, you should always consider the following:
As stated above, your personal-loan repayments will depend entirely on the type of loan you opt for as well as the loan term, loan amount, interest rate and any fees. Generally, low interest rate loans are considered to be cheaper. While, because of fees, this is not always the case, an interest rate can help you to get an idea of the cost of a loan.
To get an idea of what you might have to repay based on these variables, please see the table below.
This table is based on a fixed rate personal loan of $30,000 with $5 per month in fees:
|3 years||6% p.a.||$918||$33,036|
|3 years||8% p.a.||$945||$34,023|
|3 years||11% p.a.||$987||$35,538|
|5 years||6% p.a.||$585||$35,099|
|5 years||8% p.a.||$613||$36,798|
|5 years||11% p.a.||$657||$39,436|
While the table above gives a good general indication as to what you might pay based on these rates and terms, the best way to get an idea of whether a personal loan is going to work out cheaply is by using our personal loans calculator:
Paying off your loan early can save you money over the life of the loan since you will pay less in interest and fees. However, some lenders will charge you a penalty payment for doing so, which may negate any savings that you could make.
The best course of action if you would like the freedom to repay your personal loan early is to find a lender that offers penalty-free additional repayments and early repayment. Loans that offer these features also tend to offer redraw facilities should your circumstances change and you wish to draw money back from your additional payments.
If you can't afford your repayments on a personal loan, it's important that you contact your lender as soon as possible to let them know. Most lenders will have financial hardship measures in place for just these sort of circumstances and may be able to negotiate a payment plan with you that is more manageable.
For more information on dealing with financial hardship, please refer to our guide.
Here is an overview of some of the loan types offered by lenders:
|Secured car loans||A loan used to purchase a vehicle, where the vehicle is used as security against the loan.|
|Secured personal loans||A line of credit that is guaranteed against an asset you own or buy, such as your house or term deposit account.|
|Unsecured personal loans||Allows you to borrow without using an asset as collateral.|
|Peer-to-peer loans||When money is borrowed from an individual investor as opposed to a traditional lender.|
Below is a rate guide for the personal loan types outlined above:
Are you on a low income and need your car repaired, a new appliance or help paying bills? You could qualify for a cheap, or even an interest-free, loan.
Some lenders may let you secure a loan against your engagement ring and reduce the cost of your loan.
You'll often find that if you secure your personal loan with your new vehicle, you'll be offered a cheaper rate.
If you're looking to consolidate your debt, finding the cheapest loan possible could save you a significant amount of money.
Cheaper rates. Non-banks and neobanks tend to be online, which gives them less overhead than banks. Less overhead means that non-banks tend to be able to offer lower interest rates on their personal loans.
Quick approval. As most neobanks are 100% online, application and approval times tend to be much faster than bigger lending institutions, which have lengthier processes and more documentation required.
Risk-based loans. While some bigger banks do offer risk-based loans, it's more common to find these products among non-bank lenders. This can help people with good or excellent credit histories get cheaper personal loans.
Less stringent lending criteria. Because they are able to offer personalised rates, many non-bank lenders are also able to offer loans to people with poorer credit scores. However, please note that these applicants will likely not qualify for low-rate loans.
More product features. Because they have more capital, bigger banks may be able to offer more product features on their loans than smaller non-bank lending institutions.
Physical branches. If you're someone who prefers to do things face-to-face, a personal loan from a bank might work better for you.
Reputation. If you like to know exactly who you're borrowing money from, bigger banks are more well-established and have an easily researchable reputation.
Trust and customer loyalty. Borrowers may prefer to apply for a bank that they have been a member of for a long time.
Higher loan amounts. Again, because of their larger capital, banks may be able to offer larger loans to their customers.
Besides the interest rate, comparison rate and associated fees, consider the following before applying for a loan:
Different lenders have different criteria to determine a customer's eligibility for a loan. Generally, to be eligible for a personal loan, you will need to meet the following criteria:
You will also need to prove your ability to manage the loan by providing income, asset and employment information.
If you want a secured personal loan, you will need to provide details of what you intend to use as security, and this secured asset will also have to meet certain eligibility criteria.
After you've found a cheap personal loan using one of the finder.com.au comparison tables, you can follow the secure link to the lender's online application form and begin your application. The specific information you will need to provide may differ between lenders, but will generally include the following:
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Winner, finalists and methodology for Finder Awards 2020 Best Risk Based Personal Loans.
Alex is a neobank lender specialising in personalised rate personal loans. Find out more about Alex's personal loans and what fees and features are involved.
nmoni is an Australian lender that offers personal loans to both good and bad credit applicants. Find out more about nmoni's rates, fees and features.
The homeloans.com.au Low Rate Home Loan with Offset is fee-free and features a 100% offset account.
You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.
You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
You'll receive a fixed rate between 6.99% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
You'll receive a fixed rate between 6.95% p.a. and 17.95% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Make additional repayments or pay off the loan early, penalty-free.
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