Compare low interest personal loans 2022

What is a low interest personal loan?

A low interest rate personal loan will generally offer interest rates of around 4-6% p.a.

From a lender's perspective, there are a few reasons why one loan may be more competitively priced than another.

The first is only good news for the borrower, in that the lender is competing for your business by offering better rates than its competitors.

The second reason is that the lender may be making up for the lost revenue from interest rates through extra fees and charges. This is why lenders must advertise a comparison rate - an estimate of the interest rate after fees - alongside their standard rates. Comparison rates are based on loan terms that could differ significantly from what you are borrowing, so it's best to use a personal loan calculator to truly understand what you will be paying.

What types of personal loans have the lowest interest rates?

There are a few types of loans you can look at if you want one with a low interest rate. These include the following:

• Secured personal loan. If you have an asset to offer as a guarantee you can get a lower rate with a secured personal loan. Car loans are a common example of a secured personal loan. The security mitigates the risk for the lender, so they're able to offer you a lower cost, and you're still able to use the funds for the purpose you need.
• Risk-based personal loan. Many lenders are now offering risk-based personal loans. This means the interest rate is personalised to you. So, if you have a good borrowing history and a high credit score (you can check your credit score for free here), then you may be able to get a low interest rate.
• A competitive unsecured personal loan. Due to a significant rise in neobank and non-bank personal loan lenders, there are more competitive unsecured personal loans available on the market. If you compare your options, which you can do using the table on this page, you'll be able to find a low interest rate.

Interest rate guide

How much can I borrow with a low rate personal loan?

As a low interest loan is simply a traditional personal loan with competitive rates, you can generally expect loan amounts from $2,000 up to $100,000. The amount you qualify for will depend on a number of factors, such as the following:

• Income. How much you earn determines how much you can borrow. The lender will check if you can afford the loan based on your salary.
• Security. You may qualify for a bigger loan if you offer an asset as collateral. Your asset can be equal to or greater than the value you wish to borrow. Depending on the lender and security you offer, you could even get a loan up to $2,000,000.
• Credit score. If you have a good or excellent credit score, you're more likely to qualify for a higher loan amount. If you have defaults on your record, the lender may see you as a risky borrower and limit your borrowing.
• Joint application. If you are making a joint application, your partner's salary and credit score will also be taken into account. You could qualify for a larger loan as a result.

What is a good rate for a low interest personal loan?

A competitive rate is generally anything less than 6% per annum.

The lowest rate doesn't necessarily mean this is the best low interest loan for you, there are other features that make some low interest loans better than others if your aim is to save money. Check if your loan has the following:

• Short loan terms. Opting for a longer term could prove to be more expensive over the lifetime of the loan. If your loan is affordable with a shorter term, you could pay it off faster and save money.
• No or low exit fees. Some loans allow you to pay it off early for free, while others may have a charge. This exit fee could be expensive in some cases. Some loans do not have this facility at all. This means that you won't be able to pay off your loan early even if you can.
• Extra repayments. Some loans may allow you to make extra repayments. This can help shorten the lifespan of your loan and help you pay it off faster. Some loans may have a cap on how many extra repayment you can make in a year. Some may not allow it at all.
• Extra features. This can include online account management and redraw facilities. Free features are best as the cost can add up.

How do I compare personal loans with low rates?

The key thing to keep in mind is that low interest rates don't necessarily mean a cheaper loan. Interest rates are one piece of the puzzle and if you want to save money over the lifetime of your loan, consider the following when comparing your options:

What type of loan do I need?

Depending on what you intend to do with the loan, some options will be more suitable than others. Lump sum personal loans come in secured and unsecured forms, with either fixed or variable interest rates. Would you instead prefer access to money when and where you need it? Consider a line of credit or personal overdraft. Choosing the right loan will help you avoid spending money you don't need to spend.

What fees are included in the loan?

Personal loan fees come in various forms, and you should make sure you understand what fees are included in your loan before you sign on. The comparison rate advertised alongside the interest rate is an estimation of what you'll be paying inclusive of fees, however remember it is only an estimate. Some common fees to look for are establishment fees, ongoing monthly or annual fees, late payment or dishonour fees, early exit fees, and redraw fees. While some fees may seem insignificant compared to your loan, they do add up and many can be avoided.

Can I pay off my loan early or make additional repayments?

Interest is usually paid on the amount owed, so extra repayments or paying it off early can have a big impact on how much you end up spending. Keep in mind that some loans will only allow a certain amount to be paid off annually, and others may have fees associated with paying it off early.

Does my loan come with extra features or special offers?

Like most products, loans can come with extra features or limited time offerings. Examples of some of these would be an easier-to-manage mobile app, having certain fees waived, or a limited time interest rate discount. Keep an eye out for these deals as they could be the winning difference between one loan and another. Fee free extra repayments are also a feature to look out for, as paying off your loan faster can reduce the total amount of interest you pay.

What are my loan terms?

Your loan term is how long you will be paying your loan off for. Generally, personal loans have terms of one to seven years. The same loan amount over a longer term will have cheaper monthly repayments, however a shorter term could save you money overall. A $20,000 loan at 6% p.a. will cost you $3,199 in interest over five years, while over seven years that same loan will cost you $4,542. If you can afford the higher monthly payments, you'd be saving over $1,300 by paying over the shorter term.

Five tips to help you get the lowest rate

1. Check your credit score. Your credit score tells your lender what kind of a borrower you are. If you have a good credit score, you're a low-risk borrower. If you have a poor credit score, you're a high-risk borrower. Make sure your credit is in good standing by checking your credit score and full credit report for free on Finder.
2. Is the loan risk-based? If you have a good credit score, you could potentially stand to gain from a risk-based loan. If your credit score isn't good and the loan is risk-based, you'll probably have to pay more than the advertised rate.
3. Use collateral. If you offer security for the loan, you will usually get lower interest rates and fees on your loan. This is because the collateral makes the loan less risky for the lender.
4. Always compare. Don't settle for the first loan you find. You could potentially find something cheaper if you spend some time comparing loans and loan features.
5. Negotiate with your lender. Your lender may offer you a particular rate based on your financials, but you could get a lower rate if you negotiate. This is where comparing loans comes in handy. You could point to a competitor's rate and let your lender know that you find the competitor's rate more compelling. They could offer a better rate to retain you.

Do low rate loans have different eligibility criteria?

Every lender has their own eligibility criteria, but the following are some basic requirements that most loans share:

• Be over the age of 18
• Have a good credit rating
• Be an Australian citizen or permanent Australian resident

The information you will be asked to provide will depend on the loan you apply for. You will most likely need to provide the following:

• Personal details including your name, contact information and proof of identification
• Name and contact details of your employer
• Details of your employment, including income amount and how you're employed (full-time, part-time, etc)
• Financial details including your assets, liabilities and any other active credit accounts

You can check the eligibility criteria on each individual loan on the Finder review page. If you have any concerns, make sure you reach out to the lender directly before you apply.

How can I apply for a low interest personal loan?

Before you apply for a loan, you should compare your options using the table above. You can find a range of competitive options when you compare low interest rate personal loans. Make sure you consider a range of lenders to find the right loan for your needs and situation. Once you've found a loan you'd like to apply for, click "go to site" to apply.

Frequently Asked Questions about low interest personal loans

Still have questions? We've done our best to answer the most common questions people have when comparing personal loans.

• Can I get a low interest loan if I'm self-employed?

  You should be able to get a low interest loan if you're self-employed and have a good credit history. But if your credit is poor, your options may be limited.

  To ensure you're offered the lowest rate possible, supply as much supporting documentation as you can. You need to be able to prove you can repay the loan without difficulty. This could include the following:

  • Tax returns. Be prepared to show the last two years of your personal and/company tax returns. This will help prove your income declaration on your applications.
  • Recent bank statements. This includes statements showing savings and business transactions. It may also include statements showing any other outstanding loans or credit cards you have with other lenders.
  • Financial statements. These may include any profit and loss statements to support your income declaration.
  • Notice of Assessment. Keep handy your most recent Notice of Assessment (NOA) given to you by the Australian Taxation Office (ATO). This will have information on the income tax you owe or owed. Depending on the lender, you may need to provide your NOAs from the last two years.
  • Company-specific information. If you own your own business, be prepared to provide information such as your company's ABN, address, etc.
  • Proof of rental income. If you receive income from rental properties, you can declare this with real estate statements or copies of your executed lease agreements.
  • Personal identification. Depending on the lender, this may be your Australian driver's licence, passport or proof of age card.

• Can I get a low interest loan if I have bad credit?

  If you have a poor credit history, the lender will view your application as high risk. This will make it difficult to get a low interest rate. By charging a higher interest rate, lenders attempt to offset the risk of lending to high-risk borrowers.

  That does not mean you will never be approved for a low rate loan. You can improve your chances if you do the following:

  • Secure the loan. If you have bad credit, you can offer an asset as security. This could be real estate, a vehicle or even valuable art or jewellery. With security, you could potentially lower your rate and increase your chances of approval.
  • Get a guarantor. A guarantor is someone who offers to pay the debt on your behalf if you fail to do so yourself. Someone with a good credit history, and who has real estate assets, could reduce your rate. You should ensure you are confident you can meet your repayments before asking someone to act as a guarantor.
  • Improve your credit rating. A bad credit rating is not forever. There are steps that you can take to improve your credit rating before applying for a personal loan.