A personal loan is money that you borrow to cover the cost of expensive purchases such as a holiday, a renovation, a wedding or medical bills. You repay the loan, plus interest and fees, over time.
According to Finder research, most Australians with a personal loan borrow less than $10,000. But some Australian lenders accept loan amounts as high as $100,000. A personal loan is smaller than a home loan but can be higher than the amount you might spend in a few months via a credit card or buy now pay later (BNPL).
The difference between an interest rate of 9% p.a. and 8% p.a. for a $20,000 loan over 7 years is over $800 in interest. Check out Finder's best personal loans to see our top picks of the month.
Your personal loan interest rate will often be based on your credit score and credit history. It's best to get a quote from a lender once you are comfortable you fit its eligibility criteria. That quote should include the interest rate you are offered, as well as any fees.
When you have that information, use a personal loan calculator to be able to confidently tell what you're repayments will be like.
Each year, Finder analyses its database to pick out some of the strongest personal loans in Australia. These are the products that came out on top based on their rates, fees and offers over the last 12 months.
NOW Finance took first place in our 2023 Personal Loan Awards for its low rates and straightforward no-fee structure.
ING came in as one of our runners-up with its unsecured loan. This is a well-balanced loan with good features, no monthly fees and fast access to funds.
Our next runner-up for unsecured personal loans is Harmoney. This loan keeps it simple with no monthly fees and a competitive rate.
NOW Finance also took first place for its secured personal loan. It has the same, simple no-fee structure as its unsecured product but you could get even lower rates by securing your loan.
IMB claims the runner-up position for secured personal loans. Not only does this loan have a strong interest rate and no monthly fees, but there are no costs for early repayments.
Our other runner up for secured personal loans is Bank of Melbourne with its competitive, fixed rate offering.
Unsecured personal loans mean you're still responsible for repaying the loan, but you don't have to offer a car, property or asset as security for the loan. This usually means a slightly higher rate.
A personal loan secured by an asset, such as a car, term deposit or home equity. If you fail to repay the loan, the lender can take the asset. Secured loans often have lower rates and better terms since the risk to the lender is lower.
While you could buy a car with a typical personal loan, rates are often better if you specifically take out a car loan. You can buy a car with a secured or unsecured loan, depending on the car you're buying. Banks and lenders offer car loans, and so do many car dealers.
These personal loans allow you to combine multiple outstanding loan and credit card debts into a single loan. This means fewer loan fees and hopefully a single, more manageable repayment with a lower interest rate.
If you have a bad credit score and a history of financial trouble you can still get a personal loan. Bad credit personal loans have higher rates, so be careful when taking one out as they are not long-term financial solutions.
All of your money habits – from paying bills on time to making purchases using buy now pay later, can impact your credit score, which can in turn impact your chances of getting a personal loan with a low interest rate.
Sarah Megginson
Head of editorial
Once you're determined to get a personal loan and you know how much you need to borrow it's important to estimate your costs properly. Use a repayment calculator and see how much you'll have to pay each month. Use different interest rates and different loan terms to get a better sense of how much the loan could cost you. And be sure to count up the cost of fees too.
Richard Whitten
Money editor
Personal loan advertising and marketing can make it appear that you'll get a far cheaper rate than you actually will. Before you get excited, find out the specific rate for your desired loan term and the loan features. Also be aware that if you're going to use a peer-to-peer, rates-on-risk lender, it's vital to check your credit score first. The higher it is, the lower your interest rate will be.
Nicole Pedersen-McKinnon
Freelance finance journalist
Check your credit score before you apply for a personal loan. A higher score usually unlocks better rates. Paying down outstanding debts and paying off any late or missed repayments will also help improve your credit score, but it does take time.
Graham Cooke
Money expert
Before getting a personal loan you should always check that you can afford the personal loan repayments and ask yourself whether you really need the loan.
If you are in a financial emergency, you should understand that taking out a loan may trap you in a cycle of debt. For more resources and support, visit the Australian government's MoneySmart website.
Personal loans are suited to borrowers looking to fund specific, one-off purchases or expenses, like a car, a wedding or a holiday. But there are other forms of credit that borrowers can use.
Some of these options may be riskier and more expensive than a personal loan:
Most lenders in Australia use risk-based pricing for personal loans. Every borrower gets a different rate based on their credit score and their own circumstances.
If you have an Excellent credit score you can get a lower interest rate. If your score is Good or Average the rate will be higher.
You can check your credit score for free through Finder before applying for a personal loan. If you have an Average or Bad credit score you can improve it before applying for credit.
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