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For most borrowers, the interest rate is the most important part of a personal loan. A high interest rate makes the loan expensive. A lower rate makes it cheaper.
But if you just look at the rate you could end up getting ripped off. Some personal loans come with hefty fees that end up costing you more compared to a low-fee loan with a higher rate.
Other factors like the length of the loan, the loan type and the ability to make extra repayments also change how cheap or expensive your personal loan ends up being.
How to make sure you loan is cheap in 2 quick steps
Compare a wide range of personal loans from different lenders first.
Looking for a personal loan that combines a low rate with minimal fees? Check out Finder's top personal loan picks for February 2025.
How fees can make a cheap personal loan more expensive
Here are 2 personal loans with the same loan term and loan amount. Loan 1 has a lower rate but a $20 monthly fee. Loan 2 has a slightly higher rate but no monthly fee.
Which is cheaper?
Loan 1
Loan 2
Loan amount
$15,000
$15,000
Loan term
5 years
5 years
Interest rate
16.00%
17.00%
Monthly fee
$20
$0
Monthly repayments
$385
$373
Total loan cost
$23,087
$22,368
The higher rate loan ends up being $719 cheaper over 5 years. All because of that little monthly fee.
Note: Comparison rates
Loans have a comparison rate listed alongside the interest rate. This figure is designed to show you the actual cost of a loan taking into account the interest rate and the loan fees.
How a lower interest rate makes a cheaper personal loan
Your personal loan's interest rate determines how much interest is charged on your repayments. Here are 3 otherwise identical loans with different interest rates.
Loan 1
Loan 2
Loan 3
Loan amount
$10,000
$10,000
$10,000
Loan term
3 years
3 years
3 years
Interest rate (p.a.)
9.00%
19.00%
25.00%
Monthly repayments
$318
$342
$367
Total loan cost
$11,448
$12,304
$13,197
In these examples the lowest rate loan works out to be $1,607 cheaper than the highest rate one.
If you have an average credit score you won't be able to get a 9.00% rate no matter how hard you look.
But every borrower can still find a lower rate, whether their credit is excellent or not. The main thing is to compare rates from many lenders and make sure you're getting a good deal.
How fees can make your cheap personal loan expensive
Some lenders charge a monthly fee just for keeping the loan account open. And there's often an application or upfront fee that can cost hundreds of dollars.
Some lenders charge a percentage of your loan amount as a fee.
Here's an example:
Your lender charges an application fee that's 1.5% of your loan amount.
You borrow $10,000.
Your application fee is $150.
How the length of your loan affects the true cost
Most personal loans have terms between 1 and 7 years. And the length of the loan really affects how cheap the loan is in 2 ways:
A shorter loan term = less interest charged, but higher monthly repayments.
A longer loan term = more interest charged over time, but cheaper monthly repayments.
A shorter loan term is technically a cheaper loan overall because you pay much less interest. But for many borrowers the cheaper loan is the one where the monthly repayments aren't crushingly high.
Every borrower has to find the right balance between the monthly repayment size and the overall life of the loan.
Here are 3 examples, using identical rates and loan amounts but different terms:
Loan 1
Loan 2
Loan 3
Loan amount
$8,000
$8,000
$8,000
Loan term
3 years
5 years
7 years
Interest rate
16.00%
16.00%
16.00%
Monthly repayments
$282
$195
$159
Total loan cost
$10,126
$11,673
$13,348
Loan 3 has by far the cheapest monthly repayments. But by taking 7 years to repay the loan you pay more than $5,000 in interest. Whereas loan 1's 3-year term means you pay just over $2,000 in interest.
4 tips to find the cheapest personal loan
Improve your credit score. A better credit score means you can get a lower interest rate from many lenders who use risk-based pricing. Check out all the ways you can improve your credit score.
Compare widely. Check out personal loans from big banks, small banks and online lenders to make sure you're getting a loan that's genuinely cheaper than the average.
Use a guarantor. If you have bad credit or are struggling to get a loan approved, having someone support your application can help you get approved and get a cheaper loan. The catch? If you can't repay the loan your guarantor is on the hook for it.
Find the right type of personal loan. There are different personal loan types that suit different borrowers, and some are cheaper than others. A secured loan will have a lower rate than an unsecured loan from the same lender, for example. A car loan with balloon payments might look very cheap at first but the final payment could make it very expensive.
Understanding different personal loan types
Secured car loans. Secured car loans are some of the cheapest personal loans but you'll need to be buying a new (or reasonably new) car and have good credit. Rates may go as low as 5% p.a. or as high as 29.99% p.a.
Secured personal loans. Rates for secured loans can range from 5% p.a. to 29.99% p.a. Like secured car loans, the rate may differ based on your risk profile.
Unsecured personal loans. Rates for unsecured personal loans can range from 8% p.a. to 29.99% p.a. depending on the lender.
How to make your repayments cheaper
Once you've found a suitable personal loan you do have a few ways to make the repayments cheaper regardless of how high or low the interest rate is.
Adjust the loan term
The length of the loan affects how cheap it is month-to-month and overall in terms of the interest costs. Play around with the loan term until you find the right balance.
Make extra repayments
Most personal loans let you make extra repayments. Putting aside even just a little extra each month to pay the loan down reduces the interest you get charged.
Just check that your lender doesn't charge a fee for making extra repayments.
Borrow less
It sounds obvious but a smaller loan size works out cheaper than a larger one. If you're able to reduce your borrowing amount you can end up saving yourself from money.
Why compare personal loans with Finder?
Addicted to details. We know taking out a personal loan is something you'll be hooked up with for a while. That's why we put hours into research for this guide (and still do at least once a month)
Rates obsessed. Lenders come in all shapes and sizes, that's why we don't just track the big banks, but all the digi folk too. Pretty much everyone but your parents to be honest.
Cash for whatever you need. Lending rates verified from 180+ products day and night. Whether you're buying a car, rennovating your home or heck just ready to let loose with the spending - we got you.
FAQs
Personal loans are typically a cheaper way to borrow money than using a credit card. Cards have much higher interest rates.
Secured car loans for new vehicles are the cheapest form of personal loan but these are only for people buying cars. And even then you'll need to be buying a car that meets the lender's criteria.
There's no easy answer to this question. Banks and other lenders are competing for your business and often set rates quite close to each other.
The best way to find the bank with the cheapest loan is to compare widely and look at not only the rates banks are charging but the fees as well.
Online lenders have lower operating costs than banks and often charge the market's lowest rates. But you will need a good or excellent credit score to unlock the cheapest loans.
And these days even the biggest banks offer some very competitive personal loan rates, so you really do need to compare widely.
Most lenders set their minimum personal loan size at above $2,000. Borrowers looking for a cheap loan below $2,000 need to be careful. Loans for small amounts put you in the territory of payday loans.
By law payday lenders can't charge interest. Instead they charge fees based on the amount you borrow. It's quick and easy to get a payday loan but you end up paying quite a lot in fees for a relatively small loan amount.
f you find a cheaper personal loan on the market you can show this to your preferred bank or lender and see if it will match the rate. It never hurts to ask.
If you already have a personal loan but it's not as cheap as you'd like, you can refinance to a new personal loan. This means applying for a new personal loan product and discharging the old loan.
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* The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.
Rebecca Pike is Finder’s senior money writer, with over 10 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise, A Current Affair, 9News, and Sky News, and contributes expert analysis to publications like Yahoo Finance and The Latch. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio
Rebecca's expertise
Rebecca has written 207 Finder guides across topics including:
Hey I have a existing personal loan with Commonwealth back was 4000 an I consolidated to 10000 can I consolidate it again and what would be best loan for me to do that with low interest rates fixed price unsecured?..
Finder
JoshuaJune 18, 2018Finder
Hi Matthew,
Thanks for getting in touch with Finder. I hope all is well with you. :)
On that page, you will see a table that allows you to conveniently compare your options based on their interest rates. Once you find the right one for you, 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 us out again.
If you're wanting to bolster your application, buy an asset with your partner or apply for a loan you're not eligible for by yourself, you can consider a joint application personal loan.
Find a low interest loan by comparing your options with Finder. See interest rates, fees, and features for loans across Australia, plus guides to help you get the best deal.
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Hey I have a existing personal loan with Commonwealth back was 4000 an I consolidated to 10000 can I consolidate it again and what would be best loan for me to do that with low interest rates fixed price unsecured?..
Hi Matthew,
Thanks for getting in touch with Finder. I hope all is well with you. :)
If you want to consolidate your personal loan, you may do so with other lenders. Here’s a list of debt consolidation loans in Australia.
On that page, you will see a table that allows you to conveniently compare your options based on their interest rates. Once you find the right one for you, 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 us out again.
Have a wonderful day!
Cheers,
Joshua