An unsecured personal loan allows you to borrow funds without using an asset as security. You get more flexibility and can use the loan to cover a holiday, car, renovations or any other worthwhile purchase.
Citi Personal Loan Plus
Citi Personal Loan Plus
Loan amounts from $5,000
Offers a reusable credit facility
Repay over 5 years
100% confidential application
Citi Personal Loan Plus
A reusable credit facility of up to $75,000. Receive a tailored interest rate between 9.99% p.a. and 17.99% p.a. (9.99% p.a. to 17.99% p.a. comparison rate) based on your risk profile, plus pay no establishment or monthly fees if you apply and are approved before 31 March 2020.
No loans offered with repayment in full due in 60 days or less
Interest rates range no higher than 36% APR
A representative example is expressed in the table above with all fees and charges payable in the Monthly Repayment column with the representative APR expressed in the comparison rate column
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What are the benefits of an unsecured personal loan?
Flexibility. You can use the loan amount however you need to. For example, you can use some of the funds to purchase furniture and the rest to consolidate debt. How you use it is up to you.
Lots of options. This is a very 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 one for you. You can choose which interest rate type you want, which loan terms work for you and which features you want to take advantage of.
Rates. 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.
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 over an agreed term, generally one to seven years, plus interest.
While you can generally use the funds how you want, you may be asked to list why you are applying for it, and this will form part of the lender's decision.
You will also be offered either a fixed or variable interest rate, but will generally receive a higher rate than on a secured personal loan. 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 the lender is taking on a higher risk. If your loan is secured, the lender can take ownership of the asset you've used for 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 make your repayments.
How do you compare unsecured personal loans?
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% to 18%.
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 up-front 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 needed for security. When getting an unsecured loan, there’s no need to supply an asset as security. If you're purchasing an asset with your funds you won't have to risk it, and you also won't need to risk an asset you already own.
Flexible loan purpose. You can use the funds however you like. Once you're approved the funds will be transferred to you and you can use them to consolidate debt, purchase what you need to or to invest.
Easy application process. Applying for one of these loans is usually quite easy. 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 60 seconds.
Can have higher fees. As there is no security with unsecured personal loans, the lender may charge higher fees to compensate. This may come in the form of an establishment fee or monthly fees.
Penalties for missed payments. Again, as there is no security asset on an unsecured loan, the lender can charge you high fees for late payments or even take legal action against you and take you to court if you default on the loan.
Higher interest rates due to no collateral being offered. As there is a higher risk involved from the lender, the interest rates are generally higher on unsecured loans. This is to cover the fact that there is no collateral involved with the loan.
Is there anything to avoid with unsecured personal loans?
Not being up-front 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 up-front with your lender about this, whether it be for business purposes or to consolidate debts.
Borrowing more than what you need. Use a personal loan repayment calculator to see how much your repayments will be and see if you'll be able to afford them 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 are 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 to make sure you get a competitive offering. Don't just look at the interest rate either; make sure you check up-front and ongoing fees as well as the comparison rate to get an idea of the true cost of the loan.
How you can 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 your unsecured loan options. After browsing through the table and finding a suitable loan, click the relevant link 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.
You must also have a good credit rating and be able to provide proof that you can pay off the loan.
You may be asked to provide copies of your payslips, bank account statements and other credit contracts.
You'll also need to provide 100 points of ID.
What are my other options?
Not sure if an unsecured personal loan is right for you? It pays to do your research. Check out some other personal loan types that you could consider.
Can I get an unsecured personal loan for business purposes?
Some lenders may allow you to use the funds from an unsecured loan for business purposes, but others will not. You will need to confirm this with the lender before you apply.
How can I get a low rate unsecured loan?
While unsecured personal loans do generally come with higher rates than secured personal loans, you can still find a competitive low rate personal loan option. Compare your options using the table above and find a loan that meets your budget.
How long do I have to repay an unsecured loan?
Fixed rate unsecured personal loans tend to offer terms of between one and five years and variable rate unsecured personal loans tend to offer terms of between one and seven years.
I applied for an unsecured loan but the rate I received was different from the advertised rate. Why?
There are two reasons this might have happened: a lender may operate on a risk-based rate system where your rate is determined by the information in your application, or the lender approved you but found you to be a higher risk, so applied a higher rate to your account.
Matt Corke is the head of publishing in Australia for Finder. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time he has survived the dot-com crash and countless Google algorithm updates.
You'll receive a variable rate between 9.99% p.a. and 17.99% p.a. (9.99% p.a. to 17.99% p.a. comparison rate) based on your risk profile A credit limit up to $75,000 that you can continue to draw down over terms up to 5 years. Note: No establishment fee and no monthly account service fees apply if you apply and are approved before 31 March 2020.
You'll receive a variable rate between p.a. and 16.40 p.a. based on your risk profile A flexible loan with amounts from $2,001 and terms starting from 6 months. Interest and comparison rates calculated for a loan term of 3 years.
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