"Fixed" means a fixed interest rate, not fixed repayments
A fixed interest rate means exactly that: the interest rate doesn't change. This effectively means your repayments won't change either. But your monthly repayments can be affected by other factors, such as loan fees.
How does a fixed rate personal loan work?
Personal loans all work in the same way: you borrow money and pay it back with interest charges and fees. But with fixed rate personal loans your interest rate stays the same. This means your repayments are fairly fixed and predictable.
You can fix your rate for the entire loan term with most lenders, or for part of the loan term.
Here's a simple example:
- You borrow $10,000 over 3 years with a fixed interest rate of 13%.
- Your monthly repayments are $342 a month for the life of the loan.
If your loan had a variable rate, then it could change at any time, potentially increasing or decreasing your repayments.
What types of personal loans have fixed rates?
You can get a fixed interest rate for most types of personal loan:
- Secured personal loans
- Unsecured personal loans
- Line of credit loans
- Loans for debt consolidation
- Car loans
What's the difference between a fixed rate and a variable rate personal loan?
Fixed rate personal loans
👍 Your interest rate stays the same each month, meaning your repayments won't change.
👍 You're unaffected by interest rate rises.
👍 If interest rates fall you won't be able to take advantage of it.
❌ Some lenders limit your ability to make extra repayments, keeping you in debt for longer.
Variable rate personal loans
👍 Your interest rate can change at any time (although lenders don't really move variable rate personal loans around that much).
👍 If rates rise your repayments rise too.
👍 If rates fall you can lower repayments.
❌ These loans let you make extra repayments more easily and are more likely to offer redraw facilities
Do fixed rate personal loans have lower interest rates?
An analysis of the rates in Finder's database shows that fixed rates are often slightly lower than variable rates on average.
- The average fixed personal loan interest rate in February 2023 for a borrower with an excellent credit score is 9.03%.
- The average variable personal loan interest rate in February 2023 for a borrower with an excellent credit score is 10.2%.
But these are average figures from a large database and are not representative of any particular product. That's why comparing rates yourself is always a good idea.
Is a fixed rate loan right for me?
The differences between fixed and variable rate personal loans are smaller than you might think. Some lenders offer the same rate for both fixed and variable loans.
For many borrowers finding a loan with fewer fees and a lower interest rate matters more than if it's fixed or variable.
A fixed rate personal loan might work better for you if:
- You want to budget your exact repayments each month.
- You're not too worried about paying off the loan early.
- You don't want to make extra repayments and redraw them.
- You're happy with the loan's rate and fees and want to forget about rising rates.
Fixed rates, early repayments and refinancing
If you fix your personal loan rate and then later decide you want to refinance to a better loan, or pay off the loan early, it might cost you.
Some lenders charge an early repayment fee for breaking a fixed rate loan early. This could be a flat fee of (for example) $300. Or it could be calculated based on your loan details and the amount your lender stands to lose when you repay the loan early.
Lenders may call this a break fee or an early repayment adjustment. Check your loan contract for the details of this cost before you fix your rate.
6 tips to get a better deal on a fixed rate personal loan
- Look for a lower interest rate. A lower interest rate will save you money by minimising your interest charges.
- Look for a loan with lower fees. Some personal loans have hefty fees that can even make a low-rate loan expensive. Fixed rate loan fees are comparable to variable rate loan fees, but repaying a fixed rate early can come with a break fee.
- Choose your loan term carefully. You can fix your loan rate for 1 – 7 years. A longer loan term costs you more in interest charges but makes your monthly repayments smaller.
- Improve your credit score before applying. The lowest fixed personal loan rates go to borrowers with excellent credit scores. Get your credit in top shape before you apply for a loan.
- Make sure you meet all the lender's borrowing requirements. Check the lender's website and its lending criteria before you apply. This ensures you don't waste time applying for a loan you're not eligible for (which hurts your credit score if you get rejected).
- Avoid borrowing more than you can afford. Borrowing more than you can afford puts you at risk of defaulting on your loan repayments. It also makes it harder to get your loan application approved.
Why compare personal loans with Finder?
Our personal loan comparison is completely free to use. There are no costs at all for you to use our database to find a better deal. Better still, we regularly run exclusive deals that you won't find on any other site.
We've researched and reviewed hundreds of loans as part of our Finder Awards. Our database and tables are always up-to-date and our in-house experts regularly appear on Sunrise, 7News and SBS News.
We are independently owned and have a mission to help Australians make better financial decisions. That means our opinions are our own and you can compare nearly every personal loan in Australia (and find a better deal).
Since 2014, we've helped 300,000+ people find a personal loan by explaining your options simply. You don't need to give us any details to use our comparison. We're here to help you make a decision.
We're here to help
Frequently asked questions
More guides on Finder
Best Cyber Monday deals you can still get today: Up to 70% off
Black Friday is now over, but you can still pick up stacks of Cyber Monday deals that are every bit as good.
How a pink trading platform dominated New Zealand
Sharesies boasts 500,000 Kiwi customers - or one-tenth of the New Zealand population.
Woolworths vs Coles: Which paid membership is better? [VIDEO]
Is it worth spending more with Everyday Extra or Coles Plus?
Savings with Sarah #10
Aussies are predicted to spend $30 billion this festive season. Here's 7 key tips on how you can save on gift-buying.
Cyber Monday laptop deals 2023
Access deals and discounts of up to 65% off laptops from Dell, Microsoft, HP and more in the 2023 Cyber Monday sale event.
Standing desk sale: 35% off at Omnidesk for Cyber Monday
Upgrade your home office this Cyber Monday with 35% off ergonomic standing desks from Omnidesk.
Cyber Monday iPhone deals 2023
If you're looking for iPhone deals in this year's Cyber Monday sales, check out our roundup of the very best discounts around.
Virgin flights to Uluru: How many points do you need?
Can you get a red-hot deal for the red centre?
How to avoid a Christmas debt hangover
11% of us are putting our holiday shopping on plastic.
Black Friday Weekend: Today’s 25 best deals
From cutting-edge gadgets to deluxe mattresses, these are the best Black Friday deals you can get over the weekend.
Ask an Expert