Unsecured personal loans
Everything you need to know about unsecured personal loans and how to find the right one for your circumstances.
Compare unsecured personal loans below
What's in this guide?
- What is an unsecured personal loan?
- What are the benefits of an unsecured personal loan?
- How does an unsecured personal loan work?
- How do you find the best unsecured personal loan?
- What to weigh up: The pros and cons of unsecured loans
- What happens if I can't meet my repayments on an unsecured loan?
- How to apply for an unsecured personal loan
- Frequently asked questions about unsecured loans
What is an unsecured personal loan?
An unsecured personal loan is a loan that allows you to borrow funds without using an asset as collateral. This gives you complete flexibility and means that you can use the loan to cover any worthwhile purchase.
What are the benefits of an unsecured personal loan?
Benefits of unsecured personal loans include:
Secured personal loans often have more restrictions on how you use the loan funds. For example, most car loans are secured by the vehicle purchase, so they have to be used to buy a car. Unsecured loans, on the other hand, can usually be used for any one or multiple expenses and purchases. Use the loan amount however you need to, such as purchasing furniture or consolidating debt (or both). How you use it is up to you.
Lots of options
This is a standard type of loan so you'll find most banks and lenders offer their own version of an unsecured personal loan. This gives you a wide range of options to compare to find the right unsecured loan for you. You can choose which interest rate type you want (fixed or variable), which loan term works for you and which other features you want to take advantage of.
While interest rates are generally higher with unsecured personal loans compared to secured personal loans, you can still find loans that offer low rates. Peer-to-peer lenders, for example, offer rates on unsecured personal loans that are on par with most secured loans.
What is the comparison rate on these unsecured personal loans?
A comparison rate helps you understand the true cost of a loan. Displayed as a percentage, this rate includes both the interest rate and various fees and charges that come with the loan. That's why it is generally higher than the displayed interest rate. Please read our guide to personal loan comparison rates for more information.
How does an unsecured personal loan work?
Unsecured personal loans generally let you borrow from $1,000 to $100,000 without needing to use an asset, like a car or property, as security. You can use the loan for any worthwhile purpose and repay the loan plus interest over an agreed term. Terms generally vary from 1 to 7 years.
While you can generally use the funds however you want, you may be asked to list why you're applying for an unsecured loan. This will form part of the lender's decision.
Unsecured loans will generally have higher rates than secured personal loans. You may also need to pay establishment fees or ongoing fees, so be sure to check these before you apply. Some unsecured personal loans will also come with additional features, such as the ability to repay your loan early without penalty.
Why is the interest rate higher than a secured loan?
Interest rates on unsecured loans are higher for borrowers, as lenders are taking on a higher risk. If your loan is secured, the lender can take ownership of the asset you've used as collateral to cover the cost of the loan. To safeguard themselves, lenders charge more interest on unsecured personal loans, so they have more to fall back on should you fail to meet your repayments.
How do you find the best unsecured personal loan?
Comparing your unsecured personal loan options is an important part of finding the right loan for you. Here are some things to keep in mind when doing so:
- Interest rate. Check whether the interest rate is fixed or variable and whether it's competitive. Unsecured personal loan rates generally range from 7.5–18%. Don't forget to check the comparison rate.
- Minimum and maximum loan amounts. All lenders will set a minimum that you can borrow and the majority will have a maximum – these usually vary between $1,000 and $100,000. It's important to check that the amount you need is within the range offered by the lender.
- Fees and charges. You can be charged upfront and ongoing fees with unsecured loans, so check what these are before you apply. You can look at the comparison rate to see an overall cost of the loan which includes these fees.
- Additional features. Your loan may come with additional features that you might find convenient, such as online account management, a redraw facility to access additional repayments or discounts on additional products offered by the lender.
What to weigh up: The pros and cons of unsecured loans
- No asset security. This is beneficial if you don't want to risk an asset that you're buying or one that you already own. It also opens up loans to borrowers who do not necessarily own an asset of significant value.
- Flexible loan purpose. Once you're approved, the funds will be transferred to you and you can use them to consolidate debt, purchase what you need, or even to invest.
- Easy application process. The application can typically take place online if you can provide the appropriate documentation required. After the application, you can usually get a response in as little as 60 seconds. Approval time will depend on the lender.
- Can have higher fees. The lender may charge higher fees to compensate. These may come in the form of an establishment fee or monthly fees.
- Penalties for missed payments. The lender may charge you high fees for late payments. It can also take legal action against you and take you to court if you default on the loan.
- Higher interest rates. Interest rates are generally higher on unsecured loans.
Is there anything to avoid with unsecured personal loans?
- Not being upfront about what you're using the funds for. When you apply for an unsecured personal loan, you will need to tell the lender what you're applying for. Always be upfront with your lender about this, whether it be for business purposes, to consolidate debts or take a holiday – honesty is the best policy.
- Borrowing more than what you need. Use a personal loan repayment calculator to see how much your repayments will be. This will ensure you're aware of whether or not you'll be able to afford repayments on your current budget. Even if you're offered a larger loan, consider whether you should take it on. The loan will be your responsibility to repay.
- Unlicensed lenders. Always make sure you're getting an unsecured personal loan from a licensed lender. All providers must be licensed with ASIC. You can search through the ASIC Professional Register to check this.
- Loans with excessive costs. Make sure to compare loans so that you get a competitive offering. Don't just look at the interest rate either; make sure you check upfront and ongoing fees as well as the comparison rate to get an idea of the true cost of the loan.
What happens if I can't meet my repayments on an unsecured loan?
Most lenders have financial hardship assistance in place for unforeseen circumstances. Therefore, if you can't meet your repayments on an unsecured loan for any reason, it's important that you let your lender know as soon as possible. This will help you to avoid potential late payment fees, defaults on your credit report, or legal action.
Your lender may be able to postpone a single repayment until you have the funds, apply a temporary repayment freeze, or reduce your repayments and restructure your loan, to make it more manageable for you.
How to apply for an unsecured personal loan
If you think an unsecured personal loan is for you, all you need to do is use the finder.com.au comparison table to compare unsecured loan options. After browsing through the table and finding a suitable loan, click "Go to site" to go to the lender’s website and start the application process. Typically, to get an unsecured loan you'll need to meet a range of criteria set by the lenders. You:
- Must be at least 18 years old
- Usually will need a good credit rating
- Must be able to provide proof that you will be able to pay off the loan
- May be asked to provide copies of your payslips, bank account statements and other credit contracts
- Need to provide 100 points of ID
Frequently asked questions about unsecured loans
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Personal Loan OffersImportant Information*
You'll receive a fixed rate between 6.99% p.a. and 25.69% p.a. based on your risk profile.
Apply for a loan up to $50,000 and repay your loan over 3 or 5 years terms.
You'll receive a fixed rate between 9.99% p.a. and 18.99% p.a. ( 10.88% p.a. to 19.83% p.a. comparison rate) based on your risk profile
An unsecured loan up to $55,000 you can use for a range of purposes and pay off over up to 7 years. Note: Majority of customers will get the headline rate of 12.69% p.a. (13.56% p.a. comparison rate) or less. See Comparison rate warning in (i) above.
You'll receive a fixed rate between 7.5% p.a. and 20.49% p.a. based on your risk profile
A loan from $10,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
You'll receive a fixed rate between 7.95% p.a. and 16.95% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Make additional repayments or pay off the loan early, penalty-free.
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