A personal loan is money that you borrow to cover the cost of expensive purchases such as a holiday, a car, a renovation, a wedding or medical bills. You repay the loan, plus interest and fees, over time.
According to Finder research, most Australians with a personal loan borrow less than $10,000. But some Australian lenders accept loan amounts as high as $100,000. A personal loan is smaller than a home loan but can be higher than the amount you might spend in a few months via a credit card or buy now pay later (BNPL).
The difference between an interest rate of 9% p.a. and 8% p.a. for a $20,000 loan over 7 years is over $800 in interest. Check out Finder's best personal loans to see our top picks of the month.
Most lenders in Australia use risk-based pricing for personal loan interest rates. Every borrower gets a different rate based on their credit score and their own circumstances.
If you have an Excellent credit score you can get a lower interest rate. If your score is Good or Average the rate will be higher.
You can check your credit score for free through Finder before applying for a personal loan. If you have an Average or Bad credit score you can improve it before applying for credit.
Your personal loan interest rate will often be based on your credit score and credit history. It's best to get a quote from a lender once you are comfortable you fit its eligibility criteria. That quote should include the interest rate you are offered, as well as any fees.
When you have that information, use a personal loan calculator to be able to confidently tell what you're repayments will be like.
Unsecured personal loans mean you're still responsible for repaying the loan, but you don't have to offer a car, property or asset as security for the loan. This usually means a slightly higher rate.
A personal loan secured by an asset, such as a car, term deposit or home equity. If you fail to repay the loan, the lender can take the asset. Secured loans often have lower rates and better terms since the risk to the lender is lower.
While you could buy a car with a typical personal loan, rates are often better if you specifically take out a car loan. You can buy a car with a secured or unsecured loan, depending on the car you're buying. Banks and lenders offer car loans, and so do many car dealers.
These personal loans allow you to combine multiple outstanding loan and credit card debts into a single loan. This means fewer loan fees and hopefully a single, more manageable repayment with a lower interest rate.
If you have a bad credit score and a history of financial trouble you can still get a personal loan. Bad credit personal loans have higher rates, so be careful when taking one out as they are not long-term financial solutions.
Before getting a personal loan you should always check that you can afford the personal loan repayments and ask yourself whether you really need the loan.
If you are in a financial emergency, you should understand that taking out a loan may trap you in a cycle of debt. For more resources and support, visit the Australian government's MoneySmart website.
Personal loans are suited to borrowers looking to fund specific, one-off purchases or expenses, like a car, a wedding or a holiday. But there are other forms of credit that borrowers can use.
Some of these options may be riskier and more expensive than a personal loan:
"When I took a personal loan recently it was a smooth and quick experience. I was approved for the loan with the repayments I was happy with. One thing that helped me out was knowing early on what I can afford to pay on the loan."
Wondering how we work out Finder Score? We look at 300+ personal loan products across 120+ lenders and we compare them against each other to get our simple score out of 10. Metrics like interest rates, fees and features are weighted and scaled to come up with individual Finder Scores.
To give a fair and true personal loan comparison, unsecured and secured personal loan products are scored separately. We then make assumptions on the interest rates charged for both excellent credit and average credit customers in each segment.
The Finder Score methodology is designed by our awesome insights team and reviewed by our just-as-awesome editorial team. Don't worry, commercial partners carry no weight and all products are reviewed objectively.
Addicted to details - we know taking out a personal loan is something you'll be hooked up with for a while. That's why we put hours into research for this guide (and still do at least once a month).
Rates obsessed - lenders come in all shapes and sizes, that's why we don't just track the big banks, but all the digi folk too. Pretty much everyone but your parents to be honest.
Cash for whatever you need - Lending rates verified from 180+ products day and night. Whether you're buying a car, rennovating your home or heck just ready to let loose with the spending - we got you.
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