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With personal loans, there isn't a single, all-purpose loan that suits everyone. The definition of the "best" personal loan will differ from one person to another.
This is because personal loans cater to a variety of purposes. They also have a range of features that may or may not be right for you. For example, if you're looking to renovate your home, a car loan wouldn't make sense. To find the loan that suits your circumstances, you will first need to work out what you need – this will help you compare similar loans and find the one that ticks all your boxes.
This is the first broad filter for finding the best personal loan for you. You need to ask yourself why you're taking out the loan. Are you looking to consolidate existing debt, or are you making a big purchase? You could also be looking for something specific, like a car or green renovations for your home.
Different types of personal loans are suited to different loan purposes. For instance, a secured personal loan may be a good way to finance a used car. Meanwhile, an unsecured personal loan may be more suitable to consolidate debt.
Depending on the reason you're looking to borrow, the type of personal loan that is best for you will differ. Therefore, your first step is to find a loan that matches your loan purpose.
After you've found a loan that caters to your specific loan purpose, you have to consider the features you want.
Personal loans come with a variety of features. Some of these include the type of interest you wish to pay – that is, fixed or variable. You will also need to consider how much you want to borrow and how long you want to repay it.
Other features include the ability to make additional repayments, repaying the loan early without penalty and redraw facilities.
Once you've accounted for your preferences, you can compare your loan options to find a loan with the features you want.
Apart from filtering for your specific needs, you also need to find a loan you can afford. Here's where comparison really pays off. Comparing loans can help you find the most affordable loan with all the features you're after.
Keep an eye out for the interest rate, as well as the comparison rate. The comparison rate will give you an indication of the overall cost of the loan. The range for a competitive comparison rate is anything under 10% p.a.
As well as low interest, you should look for low or no fees, as these will add to the cost of your loan. These will include establishment and monthly fees.
Some loans also come with limited time offers. This could be a discounted interest rate or fee waivers. These offers can help you keep down the cost of the loan in the long run, so it might be worthwhile looking out for them.
There are a range of personal loans you can apply for. If you're not sure what type of loan you need, we've highlighted the options. We've also included what you should keep in mind and watch out for.
| Type of loan | What it's best for | What to watch for |
|---|---|---|
| Debt consolidation loan | ✅ To consolidate debt across existing loans by rolling them all into a single loan. ✅ Can include credit card debt and/or personal loan debts. | ❗ You should ensure the new loan costs less than your older loans. ❌ If it costs more, then it's unlikely to help manage or reduce debt. ❗ You should also watch out for break costs or exit fees for your older loans. ❌ These fees add to the cost of settling your older debts. |
| Unsecured personal loan | ✅ You can use this loan for any worthwhile purpose. ✅ This includes large purchases and expenses like: ✅ Furniture ✅ Electronics ✅ A wedding ✅ A holiday ✅ Cosmetic surgery ✅ A new or used car ✅ Home renovations | ✅ You don't need to use an asset as security. ✅ This is an advantage if you don't have or don't want to tie up an asset. ❌ These loans come with higher interest rates than secured loans. |
| Personal line of credit loan | ✅ Revolving line of credit instead of a one-time lump sum payment. ✅ Useful if you aren't sure how much you need to borrow. | ✅ Pay interest only on what you use, not the entire credit limit. ❌ Comes with higher interest rates than other lump sum personal loans. |
| Secured car loans | ✅ The purchase of a new or used car. | ✅ By securing the loan with the vehicle, you can get lower interest rates. ❌ If you miss your repayments, the lender can repossess the car. ❌ You can only use the funds to purchase the car. ❌ You also may not be able to borrow enough to cover insurance and other costs. ❌ For used cars, there may also be loan requirements around the age and type of car. |
| Secured loan | ✅ Use for any worthwhile expense, including home renovations or a new car. ✅ Use a vehicle you already own as security. | ✅ Borrowing amounts are higher and loan terms longer when compared to unsecured personal loans. ✅ By securing the loan with an existing vehicle, you can get lower interest rates. ❌ If you miss your repayments, the lender can repossess your vehicle. ❌ There may also be vehicle requirements around the age of the asset you want to use. |
| Short-term loans | ✅ Getting a loan even if you have bad credit. | ❌ More expensive than other personal loans. ❌ Short loan terms, and high fees and charges. |
When comparing loans, there are a few factors you need to consider. We've included a checklist below, as well as general definitions, benefits and drawbacks you need to consider.
| Secured | Unsecured | |
|---|---|---|
| 1. Type of loan | ✅ Flexible source of funds you can access when needed. ✅ You only need to repay the funds you use. | ❌ Funds are expected to be repaid sooner, usually monthly. |
| Fixed rate | Variable rate | |
|---|---|---|
| 2. Type of interest | ✅ Interest rate is fixed at the start of the loan term. The same rate will apply for the lifetime of your loan. ✅ This makes it easy to budget for and predict repayments. ❌ If the rate goes down, you will be paying more than the market rate. ✅ If the rate goes up, you'll be paying less than the market rate. | ❓ Interest rate can fluctuate on a monthly basis, based on market interest rates. ✅ This means that your interest payments could reduce if the rate goes down. ❌ Interest payments can increase if the rate goes up. ❌ With a variable rate loan, it's difficult to budget. You may pay more for some months and less for others. |
| Interest rate | Comparison rate | |
|---|---|---|
| 3. Rates | ✅ This is the fee you're charged for borrowing money. ✅ It is displayed as a percentage. ❓May be based on your risk profile. | ✅ This includes the interest rate, as well as fees and charges included in the loan. ✅ Gives you an indication of the true cost of the loan. ✅ This figure is usually displayed next to the interest rate as a percentage. ❗ The figure displayed is only an estimate. It is calculated based on certain assumptions. ❗ For example, the display figure could be calculated based on a loan amount of $10,000 and a term of 3 years. ❗ The actual figure will change depending on your borrowing amount and term. |
| Upfront fees | Ongoing fees | |
|---|---|---|
| 4. Fees | ✅ This is a one-off fee charged at the establishment of the loan. ✅ These fees include establishment fees. There could also be documentation fees for secured loans. ✅ Some loans don't have upfront fees. ❗ These fees add to the total cost of the loan. | ✅ This fee is charged monthly or annually. ✅ These fees are charged for account maintenance. ✅ Some loans don't have ongoing fees. ❗ These fees add to the total cost of the loan. |
| Minimum amount | Maximum amount | |
|---|---|---|
| 5. Borrowing amounts | ✅ This is the lowest amount you can borrow. | ✅ This is the highest amount you can borrow. ❗ Your credit score could have an impact on this. |
| Extra repayment fees and break costs | Redraw facilities | |
|---|---|---|
| 6. Additional fees | ✅ Making extra repayments can help you pay off your loan faster. ❗ Some lenders will charge a fee if you wish to make extra repayments. ❗ You may also be charged a fee if you end up paying your loan early. This is known as a break cost or exit fee. ✅ Not all lenders charge these fees. If you plan to pay off your loan early, you should be mindful of these fees. | ✅ This facility allows you to redraw the extra repayments you've made. ✅ This is useful if your financial situation changes and you wish to withdraw some of the extra money you've put into the loan. ❗ Some lenders will charge a fee if you wish to make redraws. ✅ Not all lenders charge a redraw fee. You should be mindful of the fee if this is an important feature for you. |
| Minimum | Maximum | |
|---|---|---|
| 7. Loan term | ✅ This is the time frame within which a loan can be repaid. The minimum term is the shortest period. ✅ For personal loans, it is usually 1 year. ❗ This will be based on how much you wish to borrow and your ability to repay it within this time frame. ❗ Some lenders may allow you to choose your term within the range they provide. | ✅ This is the longest period in which the loan can be repaid. ✅ For personal loans, it can be 5, 7 or 10 years. ❗ This will be based on how much you wish to borrow and your ability to repay it within this time frame. ❗ The longer the term, the more interest you're paying. Sometimes long terms can make your loan more expensive. |
The answer is yes and no.
Finding the lowest interest rate is a good indication of a competitive personal loan, but interest rates are not the only feature you should look into. You should also consider other fees and features involved.
Some loans advertise low interest rates but come with high fees. In this case, the loan may cost you more than the benefit you receive from a low rate. This is why you should take note of the comparison rate. It will give you an indication of the overall cost of the loan.
Additionally, if you want features like the ability to repay the loan early, you should consider break costs. Some loans allow you to repay the loan early without penalty. If that's a priority, you should account for this cost too.
When you're researching loans, you may have noticed that some lenders provide a range of interest they can charge. For instance, your rate could be anywhere between 6% and 18% p.a.
This is because your rate will be determined by the risk you pose to the lender. The higher the risk, the more likely you are to default on your payments. To reduce the risk of lending, lenders will charge higher interest from risky borrowers.
This risk is calculated based on your credit history. If you have excellent credit history, you're more likely to receive the minimum rate advertised. But if you have a few negative credit listings, you'll receive a higher rate than if you didn't. Your credit history plays a role in your ability to borrow and the overall cost of the loan.
We've gathered a few examples below to give you an idea of what the average rate is based on your credit score.
| Lender | Excellent credit score | Good credit score | Fair credit score |
|---|---|---|---|
| NAB | 6.99% p.a. | N/A | 12.69% p.a. |
| OurMoneyMarket | 5.45% p.a. | N/A | N/A |
| Alex | 5.45% p.a. | 10.99% p.a. | 19.99% p.a. |
| Harmoney | 5.35% p.a | 12.29% p.a. | 17.49% p.a. |
| SocietyOne | 8.49% p.a. | 11.69% p.a. | 15.99% p.a. |
| Wisr | 9.45% p.a. | 16.95% p.a. | 19.95% p.a. |
| Pepper Money | 5.95% p.a. | 9.95% p.a. | 11.95% p.a. |
| NOW Finance | 5.95% p.a. | 11.95% p.a. | 15.95% p.a. |
| Average interest rate | 6.64% p.a. | 12.30% p.a. | 16.29% p.a. |
Before you apply, it's good to be aware of your circumstances and what you qualify for. It's worthwhile knowing your credit score before you apply for any form of finance. If you have bad credit, for instance, you may not qualify for an unsecured loan. But you could increase your chances by offering an asset as security.
Knowing your credit score can also help you determine whether or not to apply for that particular loan. If you, for instance, have a poor credit history, you may not qualify with some lenders. Others, meanwhile, may accommodate you, but at a higher cost. It can also give you an idea of what you can expect in terms of interest rates.
How much you can borrow will also depend on your credit history. If you have poor credit history, it's unlikely you'll receive the maximum borrowing amount – say, $50,000. Your chances may improve if you can provide an asset as security. However, you will only be able to borrow up to the value of the asset.
You should also check if the lender provides a rate estimate. A rate estimate will tell you how much you're likely to receive based on the information you've provided. This is an estimate only, and the figure may change, but it will tell you where you stand.
If you have a bad credit history, it's best to be certain that you qualify to apply. If your application is rejected, it can have a negative effect on your credit rating.
When you're looking for a personal loan, there are some common misconceptions and mistakes you can make. You should avoid:
🔍 Applying for the first loan you find. The first loan you find may not be the best loan. By searching for other loans and comparing them, you can find what works best for you.
💵 Looking only at the interest rate. As we've mentioned above, you should also consider the comparison rate and loan features.
👀 Not reading loan terms and loan restrictions. You should always be aware of all the fees and restrictions associated with the loan. There could, for instance, be fees associated with extra repayments. Likewise, you may be restricted in terms of how you use the funds. For instance, a car loan can only be used to purchase a car. A green home loan can only be used for green home renovations.
💲 Applying for more than you can afford. Lenders are bound by responsible lending laws. According to these laws, they cannot lend you more than you can afford. If you apply for more than you can reasonably repay, your application will likely be rejected. You can work out how much you can afford using a personal loan calculator.
⚠️ Applying to multiple lenders. You may think you're increasing your chances of getting a loan, but this is a no go. This is because every loan application is entered into your credit file. Multiple loan applications in a short period act as a red flag, reducing your chances of getting a loan. Your credit score could also be impacted.
🤔 Not considering all your options before applying. A personal loan may not always be the best option for you, depending on your circumstances. For instance, if you're a low income earner, there are loans designed to address this. You should only apply if you're certain that what you want is a personal loan. It is also important to be sure that using a personal loan is the cheapest option for you.
💻 After you've compared and found a loan from the table above, you can click "Go to site".
✍This will take you directly to the lender's website, where you can start the application process.
❗Keep the documents you need on hand. These will include your driver's licence, financial and employment documents, and bank details. If you're applying for a secured loan, you will need details of the asset.
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Hi,
I am wanting to consolidate my current loans of about $75000. Who would be the best and cheapest for this?
Hi Brad,
Thanks for getting in touch!
You may refer to our list of debt consolidation loans. Our guide will guide you on what steps to take in getting this type of loan. You can use our comparison table to help you find the lender that suits you. When you are ready, press the ‘Go to site’ button to apply.
As a friendly reminder, review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.
Best,
Nikki
I currently own my own home. There’s no mortgage. I was wondering about using it for a loan. How to go about it?
Hi Katie,
Thanks for getting in touch with Finder. I hope all is well with you. :)
Yes, you can use your home to apply for a secured personal loan. You can use your home as a security to increase your chance of getting approved for a loan and even borrowing for a bigger amount of money.
Press the link above to see a table that allows you to conveniently compare secured personal loans. You can compare based on the interest rate, loan term, and loan amount, to name a few. Once you’re done comparing your options, click on the “Go to site” green button to learn more or initiate your application.
I hope this helps. Should you have further questions, please don’t hesitate to reach out again.
Have a wonderful day!
Cheers,
Joshua
I would like to know if i can have a loan for a small amount, i have a working visa and im just 3 months working, so im basically starting up everything. Anyone can help?
Hi Leonardo,
Thank you for reaching out to Finder.
In general, temporary residents are eligible for personal loans in Australia. However, it’s likely you will have to meet additional criteria in order to be eligible. This may include a higher minimum income requirement. You will also need to be on a certain type of visa, according to the lender’s requirements, and the term of your loan cannot exceed the time left on your visa.
You may refer to our list of loans for non-residents. Kindly review and compare your options on the table displaying the available providers. Once you have chosen a particular provider, you may then click on the “Go to site” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have. Hope this helps!
Cheers,
Reggie
Hi there I’m looking for a personal loan to finalise a separation /divorce any ideas would be helpful. Thanks
Hi Mat,
Thanks for getting in touch. You can find the lender for your personal needs on the list above. As a friendly reminder, review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the product disclosure statement of the product and contact the lender should you need any clarifications on the loan.
Hope this was helpful. Don’t hesitate to message us back if you have more questions.
Best,
Nikki
I started an online personal loan application with Harmoney, but withdrew the application when they asked for my banking client number and password. This is not acceptable and does not seem right to me. You need to followup on this!
Hello Leigh,
Thank you for your comment.
With regard to your online banking login being asked when you apply for a loan, there are actually pay-day loan lenders that do that. Nevertheless, please know that they will not have access to your bank account and neither will the third-party service like finder that facilitates the sending of read-only copies of your bank statements. Lenders will also not store your login details and generally, this process is encrypted and secure through their site.
Learn more on why lenders ask for internet banking details.
Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.
Regards,
Jhezelyn