Best Personal Loans in Australia
Many Australians have taken advantage of personal loans as a financial tool for making important purchases or stabilising their finances. However, these loans come in many forms and it can often be tricky to compare personal loans from different companies. The goal of MNY is to help you access the best personal loans for your needs.
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What is a personal loan?
A personal loan is a way for an individual to borrow money for various purposes. The money must be repaid, along with loan interest and fees, within an agreed-upon time frame. Most loans range between $2,000 and $100,000 and last between 1 and 7 years. A clear personal loan comparison will lay out the exact numbers for each option.
Loans come in many forms: secured, unsecured, fixed-rate, and variable-rate, just to name a few. Interest rates on loans will vary widely based on your financial circumstances and on the RBA cash rate, but they will typically have better interest rates than a traditional credit card. Personal loans can also be obtained by borrowing money from friends and family.
What can I use a personal loan for?
Personal loans are typically used for a significant life event or a major expense. These could include holidays, weddings, car purchases, boat purchases, medical costs, education costs, home renovations, or debt consolidation. When you compare personal loans, you have to think about what you’ll be using the loan for.
What are the main types of personal loans?
To best understand the many types of personal loans available, you should start with the two main categories that these loans fall into.
Secured personal loans
This loan type requires a form of collateral, such as a car, which serves as a guarantee for the loan provider. If the borrower fails to make payments, the lender can seize the collateral.
Unsecured personal loans
This loan type requires no collateral, meaning less security for the lender. To insulate against the increased risk, lenders will usually charge higher interest rates on unsecured loans.
More ways to compare personal loans
Loans are designed for different purposes and with different customer bases in mind. To compare personal loan options and learn which one is right for you, you must learn the basics of each loan type.
Low interest rate loans These loans stand out by offering particularly low interest rates, but remember to always read the fine print. Oftentimes the low interest rate will be for a limited period and will then revert to a higher rate. Also watch out for extra fees and other charges.
Co-signed & joint loans This loan type allows potentially ineligible borrowers to access funds in partnership with a second person. A co-signer backs the loan but does not have access to the funds, while a co-borrower is able to use the funds in addition to guaranteeing the repayment.
Guarantor loans This loan type is similar to a co-signer loan, in which a separate party is supporting the borrower’s loan application. However, a co-signer takes responsibility immediately, while a guarantor is only responsible in the event of extended nonpayment.
Student loans This loan type is intended for university students seeking to cover education-related expenses. The intent is to make their studies affordable and to defer payment until the time when the borrower has graduated and secured gainful employment.
Debt consolidation personal loans This loan type is a way of restructuring debt, usually to obtain more favourable interest rates. Your new lender will pay off your old debts (e.g multiple credit cards, vehicle loans, home loans) and you will begin making payments to that new lender.
Overdrafts and line-of-credit loans A line of credit works like an instant cash loan: you have a pre-approved borrowing cap and you are only charged interest on the amount borrowed. Some more “easy loans” are overdrafts, which are lines of credit attached to a particular transaction account.
Types of personal loan interest rates
When searching for the best personal loan rates, you have to distinguish between different kinds of rates.
Fixed rate personal loans
This loan type features a constant interest rate that stays the same for a set period. These have the advantage of stability and predictability throughout the duration of that fixed rate.
Variable rate home loans
This loan type features a fluctuating interest rate that varies based on market trends. These are higher-risk, higher-reward depending on whether the rate rises or falls during the loan.
What should I consider when I compare personal loans?
How can you do a personal loan comparison when you don’t know what to look for? This list describes the main parameters that you should pay attention to when searching for the best personal loan.
Interest rate: This represents the percentage of the original loan amount that you will be paying back on top of what you actually borrowed. A higher interest rate will mean more money paid back overall.
Fees and charges: Separate from the loan amount and the interest, lenders will often charge sign-up fees, application fees, monthly account maintenance fees, late payment fees, or even early repayment fees.
Comparison rate: This rate incorporates the base interest rate with the fees and charges to create a more accurate bottom-line number for the cost of the loan. It is more comprehensive than the advertised interest rate.
Loan term: The amount of time you have for repayment is known as the loan term, and usually lasts 1 to 7 years. A longer loan term usually means smaller individual payments, but more money owed overall.
Specialty personal loan features
Beyond the basic parameters of a loan, you should spend some time understanding the special features that a lender offers. Some of them might have no impact on you, while others may prove extremely significant for your financial plans.
- Payment flexibility: Many lenders allow you to choose between weekly, fortnightly, or monthly repayments. One strategy is to match the repayment frequency with your pay schedule at work.
- Extra repayments: In some cases, borrowers can make additional payments towards their balance owed without incurring penalties. This can help pay off the loan faster and avoid more interest accumulating.
- Redraw facility: If extra repayments have been made towards the balance, certain lenders will allow the customer to re-borrow that money for their use. This provides access to additional funds for the future.
- Loan conditions and restrictions: Some personal loans will carry restrictions on what can be purchased with the funds. There may be other conditions on the rate or quantity of spending, so be prepared.
What do I need to apply for a personal loan in Australia?
Since a personal loan constitutes a substantial financial transaction, there are several documents you’ll need for an application. These include:
- Proof of identity (driver’s licence, passport, or other government ID)
- Proof of income via recent payslips and/or bank statements
- Recent credit card statements to assess your spending patterns
- Current financial assets and liabilities
You should also note that there are certain eligibility requirements to obtain a personal loan. These will vary for each provider, but generally, lenders require that you:
- Be 18 years of age
- Be an Australian citizen or permanent resident
- Be fully employed or can demonstrate employment stability
- Have a strong credit score
Further Readings on Personal Loans
Here are some of our most popular articles on personal loans. Feel free to browse through them and learn more about the different types of personal loans, how to get a personal loan, and how to compare personal loans.
Credit Score Tips
Having a strong credit score is very important, but it’s not always clear what these scores mean or how exactly they’re calculated. Luckily, you don’t have to stay in the dark. Find out why your credit score matters and what you can do to improve your credit and access better lending opportunities.
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Friends and Family Loans
Getting a loan from someone you personally know can be a great way to quickly access funds. However, if not done the right way, friends and family loans can cause you a lot of grief. Learn about the reasons why people borrow from friends and family and what the advantages and disadvantages are.
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Reserve Bank of Australia Interest Rates
The Reserve Bank of Australia cash rate is one of the most-discussed numbers on the news and in finance circles, but what does it really mean? Learn how RBA interest rates are decided, what they’re impacted by, and what an increase or decrease in rates will mean for your financial future.
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Debt Consolidation in Australia
If you’re juggling several credit cards, vehicle loans, and maybe even a home loan, it could be time to consider debt consolidation. This financial agreement helps restructure your debts to give you better interest rates, friendlier terms and conditions, and a more manageable payment plan.
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Best Finance Apps in Australia
Making a budget isn’t easy, and sticking to it is even harder. Fortunately, finance apps can help. These services create a single, comprehensive dashboard of your spending and saving in order to help you get your financial future on track. See how budget apps differ and which one is best for you.
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Getting the best personal loans FAQ
Personal loan comparison takeaways for savvy consumers
Loans are a valuable resource for Australians looking to make lifestyle upgrades and stay on top of their finances. Personal loans come in many shapes and sizes and offer a diverse array of features, so it’s important to find one that matches your specific needs. Equipped with this knowledge, you will be able to find the very best personal loans in Australia.