Compare Personal Loans

Compare a wide range of unsecured personal loans from $2,000 to $45,000 and choose the loan that’s right for you.

Compare some of Australia’s most popular personal loans*

Brand
Interest Rate (p.a.)
Comparison Rate (p.a.)
Upfront Fees
Monthly Fees
Repayments
Pepper Money
Pepper Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.95% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $200

Monthly Fees

$13

Repayments

$0 per month
NAB
NAB Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 9.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$10

Repayments

$0 per month
ANZ
ANZ Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 15.99% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$10

Repayments

$0 per month
Community First CU
Community First Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 11.99% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$0

Repayments

$0 per month
Community First CU
Community First Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 11.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$0

Repayments

$0 per month
Gateway Bank
Gateway Bank Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 10.59% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$149

Monthly Fees

$0

Repayments

$0 per month
Gateway Bank
Gateway Bank Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 9.84% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$149

Monthly Fees

$0

Repayments

$0 per month
Newcastle Permanent
Newcastle Permanent Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$250

Monthly Fees

$0

Repayments

$0 per month
Beyond Bank
Beyond Bank Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 13.45% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$175

Monthly Fees

$0

Repayments

$0 per month
Bank Australia
Bank Australia Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 11.89% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$0

Repayments

$0 per month
People's Choice CU
People's Choice Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 9.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$250

Monthly Fees

$0

Repayments

$0 per month
Nimble
Nimble Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $195

Monthly Fees

$0

Repayments

$0 per month
BOQ
BOQ Personal Loan

Interest Rate (p.a.)

from 10.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$8

Repayments

$0 per month
ME Bank
ME Bank Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 10.98% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$250

Monthly Fees

$0

Repayments

$0 per month
HSBC
HSBC Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.5% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$5

Repayments

$0 per month
Citibank
Citibank Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 9.99% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$0

Monthly Fees

$0

Repayments

$0 per month
CUA
CUA Personal Loan

Interest Rate (p.a.)

from 9.89% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$175

Monthly Fees

$0

Repayments

$0 per month
Bendigo Bank
Bendigo Bank Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 12.79% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$5

Repayments

$0 per month
Bankwest
Bankwest Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 10.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$195

Monthly Fees

$8

Repayments

$0 per month
Suncorp
Suncorp Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 9.49% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$175

Monthly Fees

$5

Repayments

$0 per month
Suncorp
Suncorp Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 9.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

$175

Monthly Fees

$5

Repayments

$0 per month
Coles
Coles Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 9.99% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$199

Monthly Fees

$10

Repayments

$0 per month
Latitude
Latitude Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $250

Monthly Fees

$13

Repayments

$0 per month
St George
St George Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 12.99% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

from $195

Monthly Fees

$12

Repayments

$0 per month
St George
St George Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 11.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $195

Monthly Fees

$12

Repayments

$0 per month
SocietyOne
SocietyOne Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.4% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $3

Monthly Fees

$0

Repayments

$0 per month
SocietyOne
SocietyOne Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.50% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $3

Monthly Fees

$0

Repayments

$0 per month
Now Finance
Now Finance Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.95% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $495

Monthly Fees

$13

Repayments

$0 per month
ING
ING Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 8.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $100

Monthly Fees

$0

Repayments

$0 per month
Wisr
Wisr Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.95% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $595

Monthly Fees

$0

Repayments

$0 per month
Wisr
Wisr Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 7.95% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $595

Monthly Fees

$0

Repayments

$0 per month
ANZ
ANZ Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 12.45% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $150

Monthly Fees

$10

Repayments

$0 per month
NAB
NAB Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 9.99% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

$150

Monthly Fees

$10

Repayments

$0 per month
Westpac
Westpac Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 11.99% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $250

Monthly Fees

$12

Repayments

$0 per month
Commbank
Commbank Personal Loan (Variable Rate)

Interest Rate (p.a.)

from 11.50% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

from $150

Monthly Fees

$10

Repayments

$0 per month
Commbank
Commbank Personal Loan (Fixed Rate)

Interest Rate (p.a.)

from 11.50% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $150

Monthly Fees

$10

Repayments

$0 per month

Interest Rate (p.a.)

from 7.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $299

Monthly Fees

$0

Repayments

$0 per month

Interest Rate (p.a.)

from 7.49% (fixed)

Comparison Rate (p.a.)

Info

Upfront Fees

from $299

Monthly Fees

$0

Repayments

$0 per month

Interest Rate (p.a.)

from 6.49% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

from $299

Monthly Fees

$0

Repayments

$0 per month

Interest Rate (p.a.)

from 6.49% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

from $299

Monthly Fees

$0

Repayments

$0 per month

Interest Rate (p.a.)

from 6.49% (variable)

Comparison Rate (p.a.)

Info

Upfront Fees

from $299

Monthly Fees

$0

Repayments

$0 per month

Comparison rates for loans under 3 years are based on an unsecured personal loan of $10,000 over 36 months. Comparison rates for loans 4 years and above are based on an unsecured personal loan of $30,000 over 60 months.

Warning: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

*Products shown do not represent all rates available from all lenders, or all rates available from the lenders presented. RateSetter interest rate is based on a borrower with an excellent credit history using rates and fees applicable as at 6pm, 14 July 2020. All other interest rates and fees displayed are as advertised by the respective lender on their website as at 22 May 2020 and may include short-term promotional offers. Comparison rates are calculated by RateSetter. The actual product, rate, fees and charges you might be eligible for may be different based on your loan term, loan amount and credit characteristics.

Other fees and charges not shown here may apply. Rates shown are subject to change without notice. Information on this page does not constitute an offer of credit. RateSetter Australia RE Limited does not provide credit assistance in relation to all products compared on this page. The displayed order of products shows the lowest monthly repayment as default or is based on your sorting options and does not represent a suggestion that a particular credit product is appropriate for you.

Get the lowdown on personal loans

Looking to start that home reno, shrink your credit card debt or plan your next jet setting holiday? A personal loan may help you achieve more, sooner whilst saving you money compared to other high-interest options like credit cards.

Doing your ‘homework’ will help you understand what you are signing up for when it comes to personal lending. In this section, we explore the ‘nuts and bolts’ of personal loans: what they are, how they work and how to compare them. When you’re done, you’ll be equipped with all you need to shop around and find a loan that is right for your situation.

What is a personal loan?

A personal loan is a sum of money that you borrow from a lender (a bank, credit union or online lender) over an agreed time period. The loan is paid back in regular instalments (weekly, fortnightly or monthly) with interest, which may be fixed or variable across the life of the loan.

In Australia, you can borrow between $2,000 and $50,000 across 6 months to 5 years, however, there are some lenders that offer up to $70,000 over 7 years. In addition to a set repayment schedule, some lenders will also allow you to make early repayments. This gives you the flexibility to reduce the time to repay your personal loan, meaning you save on interest costs.

Low rate personal loans can be more cost-effective than other types of finance. Each lender will offer different interest rates that you have to pay on the amount you owe. It’s worth checking carefully for any fees and the amount of time you have to pay back the loan when comparing against other sources of finance (e.g. credit card, line of credit, home loan top-up).

What can I use a personal loan for?

You can use a personal loan to fund a range of purposes, from buying a car and consolidating debt to renovating your home or planning your dream wedding. While your loan purpose is flexible, you will need to share this with your lender when you apply. This will then be taken into account when considering how suitable a personal loan is to your situation and the maximum amount your lender is willing to offer you.

Based on a recent survey of RateSetter personal loans, there are seven loan purposes that Australians borrow for more than any other.

top 7 personal loan purposes

Each lender will have their own criteria for assessing loan purpose, so it’s important you make sure your purpose is covered before you apply. As a general rule, things like tax bills, court fines or penalties and margin loans are unlikely to be acceptable to your lender.

How do personal loans work?

Personal loan features vary across different lenders. Understanding the different building blocks of a loan, how they can be packaged and the pros and cons of each will be important factors in helping you choose the right personal loan.

What to look for in a personal loan?

Interest Rate

The interest rate, also known as Annual Percentage Rate (APR) or Advertised Rate, is the percentage that you’ll pay on top of the amount you borrow in interest, usually expressed as an annual rate.

Interest rates vary depending on the lender, your credit history, your repayment schedule and a range of other factors. They are based upon the lender’s calculation of risk (for you as an individual and the market as a whole) and their underlying costs.

Many lenders market their products using a ‘headline’ advertised rate, which represents the best rate they are able to offer a customer. Often this low rate is available to only a small proportion of borrowers. Before you apply anywhere, it pays to do your research and get a personalised rate from a number of providers. You just need to make sure that the lender’s quote process is ‘credit score friendly’. That is, they only conduct a soft-check on your credit file which won’t impact your credit score.

The competitive nature of the personal loans market in Australia means it pays to shop around for a better rate. That being said, the lowest interest rate does not necessarily mean the best loan. You need to consider the total cost of the loan including interest, fees and other costs to truly assess the value of any interest rate on offer.

Comparison Rate

The comparison rate represents the overall cost of a loan, including the interest rate and fees, expressed as an annual percentage. As a result, the comparison rate is usually higher than the interest rate charged on the loan.

Under the National Consumer Credit Protection Regulations, lenders must provide a comparison rate when they advertise an interest rate. This was introduced to stop lenders advertising lower rates when the total cost of the loan would be significantly more once fees and other costs were included.

For personal loans, there is a standardised measure for how comparison rates are calculated:

For personal loans 3 years and under comparison rates are calculated on a $10,000 loan amount over 36 months.

For personal loans 4 years and over comparison rates are calculated on a $30,000 loan amount over 60 months.

Whilst the comparison rate is a useful tool for comparing personal loans on a like for like basis it’s important to remember that not all costs are included. For example, you still need to consider:

  • Late payment fees
  • Early repayment fees
  • Deferred establishment fees

Repayments

Your repayments are the amount you agree to pay to your lender on a regular schedule. Repayments can be weekly, fortnightly or monthly and vary by lender. Whereas interest rates and comparison rates can sometimes hide the true cost of a loan, your monthly and total repayments provide a clear basis for comparing the value of personal loans from different lenders. When making your comparisons, however, it is important that the loan repayment calculations have been quoted inclusive of any ongoing fees for all lenders.

Upfront Fees

Upfront fees, also known as establishment fees or credit assistance fees, are ‘once-off’ charges that are applied at the commencement of a personal loan. These fees can be:

  • A flat fee (e.g. $150) that applies regardless of the value of the loan
  • A tiered fee (e.g. $250, $500, $750) based on the total amount borrowed
  • A percentage fee (e.g. 4%) based on
    • the total amount borrowed; and
    • the credit or risk profile of the customer
  • A hybrid fee (e.g. $200 + 2% of the loan amount)

Upfront fees are usually capitalised to the loan. This means the upfront fee is added to the amount you wish to borrow. For example, if you are borrowing $10,000 with an upfront fee of $300, the total loan amount on commencing the loan will be $10,300.

Why is this important? Well – that interest rate you are being offered will be applied to the total loan amount – inclusive of your upfront fee. In the case of a small upfront fee, the difference might be a few dollars on each repayment. On an upfront fee of 4%, however, you could be paying $1,200 on a $30,000 loan, meaning you will be charged interest on a $31,200 balance. Ouch!

If you’re considering a lender with a low-interest rate, it’s important you check to make sure there isn’t a high upfront fee that outweighs the benefit of the lower rate. This is particularly true of percentage-based fees that flex with the amount being borrowed. Checking the comparison rate and the proposed repayments will allow you to assess this compared to other lenders.

Ongoing or Monthly Fees

Ongoing fees, also known as account keeping fees or loan management fees, are fees that are paid every month across the life of the loan – without reducing the amount you owe. For example, a $10 monthly fee on a 5-year loan adds up to $600 across the life of the loan. That’s a lot of money that’s not going to repaying your loan principal.

Like all fees, the presence or absence of monthly fees is all relative to the total amount you repay over the life of the loan.

Banks and larger lenders often have lower upfront fees that are offset with a monthly fee of $10 to $13. This means the net cost of the upfront fee and the monthly fee may be higher than you otherwise would have paid for a lender with a higher upfront fee and no monthly fees. In the end, it pays to do the math on ongoing fees before you commit to a particular lender.

Early Repayment Fees

Repaying your loan as quickly as possible is a clever strategy as it will reduce the overall amount of interest you pay on your loan. However, if you do find yourself in a position to do this (well done!), the last thing you want is to be hit with an early repayment fee (also known as an exit fee).

Early repayment fees can range from $0 up to $800 or a % of the loan value on repayment, with $150-175 being the most common fee. That’s a fair amount for you to pay for doing something that is good for you. It, therefore, pays to read the fine print on fees before you commit to a loan.

It’s worth noting that some lenders have set conditions that trigger an early repayment fee that varies with the type and duration of the personal loan. For example, unsecured fixed interest rate personal loans with the banks often have far stricter early repayment terms than for their variable rate loans. Lenders with no early repayment fees ultimately provide you with the highest degree of flexibility in how and when you repay your loan.

Market Insight. The average RateSetter borrower takes just 28 months to repay a 3 year loan and 43 months to repay a 5 year loan. That’s a lot of people who are saving thousands of dollars in interest thanks to no early repayment fees.

Penalty Fees

We all know we should try to avoid penalty fees at all costs — it’s just throwing your money away — but we’ve all missed a direct debit from time to time. It’s why you should always make sure you are aware of any penalty fees and make sure they are not too onerous.

The most common penalty fee associated with personal loans is the ‘default’, late or missed payment fee, which usually arises where there are insufficient funds in your nominated account on the day a payment is due. Late payment fees range from $20 to $35, however, some lenders will waive the fee if the account is brought up to date within 3 days. It can help to make a budget of your expenses before you agree to the loan so that you know that you’ll comfortably be able to make repayments. You should also consider opening separate savings accounts to transfer funds into each payday that separate from your daily transaction account to ensure funds are always available.

When it comes to penalty fees, it is a case of buyer beware. Always take the time to read the loan terms and conditions and look out for any other hidden fees, including ‘new age’ penalty fees like charges to receive paper statements.

Loan Amount

The loan amount is how much you intend to borrow. This is the principal amount upon which interest is paid (plus any upfront fees). In Australia, lenders have a minimum loan amount and maximum loan amount that they accept. These generally range from $2,000 to $50,000, although a small number of lenders may lend up to $70,000.

Within the advertised range, however, most lenders apply loan capping rules. This means they adjust the maximum loan amount you may eligible for based on your credit score, income, mortgage status and a range of other factors. This maximum loan eligibility will usually be communicated to you when you get an initial quote or rate estimate from a lender.

Even once you have applied with a lender for a specific loan amount, they may come back to you with a ‘counter-offer’. A ‘counter-offer’ is a conditional approval based on a loan amount that is lower than the amount you’ve requested but one the lender believes you can afford and meets their responsible lending requirements.

Whilst it may be tempting to borrow as much as you can, make sure your repayments will be realistic to make within your budget. This will be a significant factor in determining whether your loan will be approved.

Loan Term

The loan term represents the length of time it will take to repay the loan in full with a regular repayment schedule. In Australia, lenders offer terms from 6 months to 7 years, with 3 and 5 year terms being the most common. A longer-term loan will usually attract a higher interest rate and the loan will cost you more overall but your repayments will generally be lower.

Customer Experience

All lenders operate differently. So whilst customer experience isn’t a traditional product feature, it does go a long way to determining how quick and easy it is to apply, get approved and manage your loan. Trusting you are getting the best deal, a lender who cares about your experience should be a key factor in your decision.

The best place to start doing your homework is to check out reviews on third-party websites that provide independent and verified feedback about customers experience with a lender. They tell you a lot about the customer experience at an aggregate level more than any list of features and attributes might. Product Review, TrustPilot and Google Reviews all provide insights into the best performing personal loan providers.

Each year, Canstar assesses and rank 100s of personal loans to help borrowers to decide which ones will be awarded a 5-star rating.  In addition to rating the overall product’s value (80% of the score), Canstar’s ratings include 20% for the loan’s features. This includes Loan Management and Customer Service and Support. For a loan to get a 5-star Canstar rating, the lender has to provide great customer service and tools, such as an online portal for managing your loan and repayments.

Market Insight. RateSetter is the only online lender to have received Canstar’s Outstanding Value Award for personal loans five years running: 2015, 2016, 2017, 2018 and 2019.

What are the different types of personal loans?

The different types of personal loan can significantly change the costs involved and what is needed from you in order to be approved for a loan.  It’s important to weigh up which is best for you.

Fixed vs Variable Interest

Personal loans have two interest repayment types, fixed and variable. Both have different features that will influence whether they are suitable for you.

With a fixed-rate personal loan, the amount you pay in interest is set from the beginning of the loan through to completion. This means your weekly, fortnightly, or monthly repayments remain the same. When you choose a fixed interest rate you benefit from being able to lock in a competitive rate with the security of knowing your repayments will remain steady regardless of changes in the market. This is a useful feature when managing a budget.

Fixed-rate loans do, however, tend to attract a higher rate of interest than the current variable rates on offer. That being said, when interest rates are already low, locking a fixed-rate can protect you from any future rate increases due to changes in the lenders funding or broader economy.

Why you would choose a fixed interest personal loan?
+ Repayments are set for the dursation of the loan
+ Easier to maintain a budget
Early repayment or exit fees are more common
Less flexibility when it comes to repayments

With a variable-rate personal loan, the interest rate can change or vary over the life of the loan. Variable interest rates can change for a number of different reasons (e.g. market changes, cost of funds etc.) and can vary between loan providers. When rates move down, you as the borrower benefit from lower repayments. When rates move up, you will need to be able to cover the added costs. To account for this uncertainty, variable rate loans have a lower starting price than their fixed-rate counterparts.

Want greater flexibility or are hoping to pay your loan back early? Variable-rate personal loans often have fewer repayments restrictions than fixed-rate loans, so you can make additional repayments and repay your loan early without getting charged an early repayment fee.

Why you would choose a variable interest personal loan?
+
Greater flexibility to repay your loan early, often without fees
+ Benefit from any reduction in interest rates
+ Interest rates are generally lower
Potential for rates to move up significantly

Finally, it’s worth remembering that the rate you may be offered on a personal loan may be higher than the advertised fixed or variable-rate. The lender will usually decide your interest rate based on your credit score, income, expenses, and assets. So, whilst the variable option may seem more favourable initially, once you’ve received a personalised rate estimate a fixed rate personal loan may have a lower rate, and vice versa.

Secured vs Unsecured Loans

If you own an asset like a car, home or term deposit, you may be able to access a lower interest rate with a secured personal loan. With a secured loan your asset(s) will be put up as security for the loan. This means that as part of your loan approval and acceptance you will grant the lender rights over the asset, usually in the form of a mortgage, caveat or charge. In the unlikely event that you are unable to make your repayments, the rights granted to the lender will allow them to seize the asset(s) and on-sell them so that the outstanding debt can be repaid.

Because of this, lenders view secured loans as less risky and therefore are willing to offer a lower interest rate. Having an asset-backed loan may also allow you to borrow a larger amount or for a longer period than would be available to you if the loan was unsecured.

Some secured loans have special rules that impact what or how you can use the funds. For example, a secured car loan may place restrictions on the type of car, whether it is new or used, or maximum age for the car being bought. This is to ensure that assets loan to value ratio (LVR) is sufficient to cover the outstanding value of the loan in the event of default.

Why you would choose a secured personal loan?
+
Lower rates on offer
+ Increased borrowing capacity
+ Longer loan terms available
Potential to lose the asset if you are unable to repay
Longer approval process and requirements
May have restrictions on what funds can be used for

Whilst there are benefits to a secured loan, the vast majority of personal loans are unsecured. With an unsecured personal loan, no assets are used as security against the loan. In this case, a lender’s decision to provide you with a loan is based solely on how creditworthy you are. Put simply, are you more or less likely to make your repayments on time or default on the loan. As a result, choosing an unsecured loan may result in a higher interest rate or lower loan amount being offered.

Why you would choose a secured personal loan?
+
Quicker application and approval process
+ Greater freedom in use of funds
+ Your assets are not directly at risk
Interest rates can be higher
Your borrowing capacity may be lower
May only be eligible for shorter loan terms

Fixed-Term vs Line of Credit

Fixed-term personal loans work well where you have a specific one-off purchase to make or defined expenses to pay such as buying a car and paying for a wedding or holiday. They also attract lower interest rates than lines of credit, while providing you with the confidence that comes from having a predictable repayment schedule. Having a defined start and end date also ensures you are committed to repaying the debt and you are repaying the principal amount of your loan.

If its flexibility you are after, some personal loan providers offer top-up, redraw or 2nd loan options for borrowers.

A ‘top-up’ is where you add an additional amount to your existing loan. This will result in a change in your repayments and can sometimes result in a resetting of your loan term. It remains one loan, with a single repayment schedule for your convenience.

A ‘redraw facility’ works where you are able to make early repayments on your personal loan. The early repayments create a buffer between the actual amount you have repaid versus the amount that would have been outstanding on your loan original repayment schedule. This buffer is the amount you are able to withdraw at any point during the loan. In this case, your repayment schedule and amount remain the same.

Some lenders may be willing to offer you a second loan while your original loan balance is outstanding. To qualify you will need to have maintained an impeccable repayment record (e.g. no missed payments in the last 12 months) as well as be able to demonstrate you can service a second loan (e.g. you have surplus income after your existing expenses). Different lenders have different credit policies so it pays to do your research.

Why you would choose a fixed-term personal loan?
+
Know how much you are borrowing and repaying
+ Fixed repayment schedule
+ Lower interest rates
+ Better if you are less disclined with your everyday spending
A single lump sum may be more than you need right away
Less flexibility

A line of credit is a type of personal loan that works like a credit card. It allows you to draw on funds in the form of an ongoing credit facility. You pay off the debt and accrued interest in instalments, in the meantime, you can access a set amount of extra funds as you need it.

Unlike a personal loan where you get one big lump sum, a line of credit gives you a credit limit but the funds stay where they are until you withdraw them. The advantage here is that you only pay interest on the money that you actually use versus the entire amount as would be the case with a personal loan. Generally, a line of credit loan is useful if you need ongoing access to money but don’t know yet exactly how much. Some lenders provide a debit card for this.

Lines of credit offer the benefit of having ongoing access to money to spend as you wish or in case of emergency. A word to the wise: if you get tempted to spend just because you can and lack the discipline to make full payments on time, the higher interest from a line of credit can add up quickly. These loans usually come with numerous fees and charges.

Why you would choose a line of credit?
+
Access to funds as you need them
+ Only pay interest on the outstanding balance
+ Ongoing access to funds
Higher interest rates if you don’t repay in full
Higher fees
Risk of overspending with ease of access to funds

Special or Limited Purpose Loans

Some lenders offer personal loans with lower interest rates provided the funds are used for a specific purpose.

Green Loans

A green loan is an unsecured personal loan that you can use to fund the purchase and installation of approved renewable energy products (like solar panels or home batteries). These products can help significantly lower your power bills and the cost of the loan can potentially be offset by the power savings alone.

Green loans have specific criteria that may vary by lender. This may include the types of renewable technology covered, all the way down to the brand, make and model of device being installed. In order to facilitate this, the majority of green loans are offered at the point of sale by a fully accredited renewable energy installer from a list of pre-approved products. The accredited installer will assist you with your finance application and once your products have been installed, the lender will pay the installers invoice directly.

Green loans range from $2,000 to $45,000 and 3 to 7 years, however, the average loan size is around $8,000 to $12,000.

Market Insight. RateSetter is the largest provider of interest bearing renewable energy loans for consumers in Australia. As of March 2020, has lent over $65 million toward solar and home battery installations.

Home Improvement Loans

Repairing, remodelling or revamping your home can be a great way to add to the value of your property. Some lenders offer specialised loans for home improvements. These can be secured or unsecured and may attract a lower rate of interest than a standard unsecured loan.

To qualify for this lower rate, however, there may be additional costs (e.g. fees for registering mortgages or charges over secured property) and information requirements (e.g. detailed quotes, council approvals and valuations). There may also be restrictions around the use of funds, for example, some lenders will pay the borrowed amount directly to the provider(s), making it a less flexible option than a traditional personal loan.

Risk-Based Pricing

It is now more common for lenders to give a ‘personalised’ interest rate and tailor the loans offered. This is achieved through ‘risked-based’ pricing, where the rate provided is based on the probability of a borrower defaulting on a loan. The lender will calculate this by looking at your credit history, financial situation, the loan type, the loan amount and a range of other factors that are used to build your unique risk profile. If you are deemed ‘low-risk’ and more likely to pay back the loan, you’ll be rewarded with a lower rate, and ‘higher risk’ with a higher rate.

In the past, risk-based pricing wasn’t common in Australia, mainly because credit reports only showed negative credit events or ‘black marks’ (e.g. missed payments or defaults), rather than giving an overall picture. With the introduction of comprehensive credit reporting (CCR) credit providers are now required to include extra ‘positive’ information such as the type of credit you hold, the amount of credit and whether you pay your bills on time.

Most lenders will provide you with a rate estimate or quote before you go through their online application process (which does not affect your credit score). From there you should be well placed to compare the features and benefits of each loan.

What is my credit score?

Based on the information in your credit report your credit score, or rating, is a single number that sums up your how risky, or trustworthy, you are as a borrower. Credit scores are typically on a scale of 0 – 1,200 or 0 – 1,000 depending on the credit agency you use. The higher your credit score, the more ‘reliable’ you are perceived to be and the greater the likelihood of your loan being approved.

Now that the industry uses comprehensive credit reporting (CCR), credit reports are more detailed so that lenders have a better — positive and negative — picture. To calculate your credit score, credit agencies will assess:

  • How much money you’ve borrowed in the past
  • How much credit you currently have
  • How many, and what type of credit applications, you’ve made
    (This can now include payday loans and buy-now-pay-later services such as AfterPay.)
  • Whether you pay on time 
  • Any loan defaults 
  • Court judgments  
  • Information from your bank, telco, insurance and utility companies
  • Your age, address and employment situation
  • Up to two years of your history

You can request your report and rating/score from credit rating agencies before you go through, and pay for the application process. This does not impact your credit score. Be aware that because there are multiple credit agencies, the one your lender uses may not be exactly the same.

Get your free credit check from one of Australia’s major credit rating agencies: Equifax, Experian or Illion.

What does a personal loan cost?

The type of personal loan, its conditions and how quickly you pay it back impacts how much a loan costs you over its lifetime. To work out the overall cost of your loan, you need to factor in:

1. Your Interest Rate: Fixed or Variable

The biggest factor in how much a personal loan will cost you is the rate of interest you’ll pay on the amount borrowed. If you are opting for variable rate loan, it is best to also calculate a worst-case scenario, one where a loans interest rates rise significantly in the future to be sure you have a comfortable buffer in the event things change.

2. Upfront Fees

The ‘establishment’ or application fee can vary greatly, it’s an area where shopping around can make a difference.

3. Ongoing Fees

Ongoing fees that occur throughout the loan:  

  • Any monthly or annual fees (e.g. account keeping fees)
  • Any default, dishonour or missed payment fees
  • Any other hidden fees — check the terms and conditions to find these!

These three costs can be combined to create a comparison rate. As long as you are comparing the same loan terms and amount, a comparison rate helps you to compare the cost of different loans.

There may be fees for early repayments or if you pay back the loan in full early. Balance these against the benefit of reducing the amount of interest that you pay on your loan by making extra repayments reducing the amount you owe.

Always shop around and use comparison tables, repayment calculator and the comparison rate as a guide.

Taking the next steps

How do I choose a personal loan?

There is no one size fits all when it comes to personal loans, find your best fit.

You will first need to make a few key decisions to help you choose a personal loan. You can tweak these later in the process, but this helps you to start exploring, and comparing, what products are around that might fit your needs.

How do I choose a personal loan

1. Loan Amount: How much do you really need?

To decide how much you need to borrow, do some research and budget to work how much (approximately) you need for that car, holiday or wedding. In the case of debt consolidation, it helps to know exactly which debts you are consolidating and how much is outstanding.

It’s smart to only borrow what you really need, rather than all that is available to you. Remember, any money that you borrow to purchase something, the actual ‘cost’ of that item becomes much higher. 

For example, if you borrow $20,000 to buy a car under a 5 year Unsecured Loan with a fixed interest rate of 12.50%, once you factor in the average extra fees that car may actually cost you $27,417.

2. Repayments: How much can you afford to repay?

Look at your everyday budget, or create one, to see how much you can realistically afford to put towards repayments. It’s always good to give yourself a buffer; failure to pay can cost you a lot. Are you expecting any major expenses or changes in income in the next few years, such as a baby? Be sure to build this in.

Whether you receive your income weekly, fortnightly or monthly, you need to know how much you have leftover at the end of each period and how this will align with your repayments. This is to ensure there are no missed payment surprises. It may be worth opening a separate bank account for your repayments and transferring in these funds in on payday so you are never caught out.

3. Loan Term: How long will you need to repay?

Divide the loan amount by your monthly repayment to get a ballpark amount of time to repay the loan. For example, Jo wanted to borrow $24,000 to pay for his wedding. Based on his salary and existing expenses, he thought $120 per week / $480 per month would be an affordable repayment.  This would be $5,760 per year, meaning in 5 years he’d have paid $28,800— roughly, accounting for interest and charges.

A longer-term loan might seem attractive as it means lower monthly repayments, the overall (lifetime) cost of the loan is significantly higher. That being said, provided you look for a loan with flexible repayments you’ll be able to take advantage of any future pay increases to pay down your loan faster without penalty.

4. Loan Type: Decide between a secured or unsecured loan?

This will depend if you have an asset that you are willing, or able, to put up as security against the loan. If you are confident in your ability to repay the loan, then a secured loan will get you a better rate. Your asset is at risk if you can’t make the repayments.

5. Compare: Start to look at your personalised offers

Now that you, roughly, know you can start to plug these values directly into lender or comparison sites to get an estimate of your personalised interest rate and repayments. You can then start to play with different combinations, such as loan terms, and match these against your needs.

Using a third-party rating agency to help you compare

Need more help deciding? There are many third party agencies (that don’t sell loans) that rate and compare a broad range of loans.

Canstar is one of the most established and biggest financial comparison sites, comparing more brands since 1992. They release star-ratings for personal loans from many providers.

To do so, Canstar comprehensively and rigorously examines a broad range of loans available across Australia.  To come up with an overall score, they award points for:

  • Price — comparative pricing
  • Features — positive features of the product (application and settlement, product management, customer service and loan closure)

These are then aggregated and weighted to produce a total score.   This means Canstar’s ratings are reputable and transparent, so you can trust the information they provide and dig deeper if you want to. 

Other comparison sites can also be super useful, however, always check around, as they do have a business element and receive money for the people that click through to a lenders’ website. If the best rate isn’t ‘on their books’ it may not show up on their comparison. They also have ‘promoted’ or ‘featured’ loans, which they are paid to highlight, even if those loans do not truly reflect the best value loans on the market.

Another way to get information on your lender and loan is to read feedback from real (verified) customers’ on ProductReview.com.au.

What questions should I ask to choose a loan?

There are a few questions that you should ask to make sure a particular personal loan is right for you.  You can use this as a checklist to be confident you understand your loan.

  • What is the interest rate and the comparison rate? 
  • How does this compare to other loans?
  • What are the fees and charges? (Upfront, Ongoing, Early Exit) 
  • What are the terms and conditions? 
  • Do the loan term and loan amount fit your needs? 
  • Can you afford the repayments?
  • Are you comfortable with the lender? (Have you checked its reputation and accreditation?)

How do I compare personal loans?

Taking the time to compare personal loans is worth the effort. Once you have an idea of what type of loan that you’d like, it becomes easier to compare apples with apples. Comparison rates can be a really important tool to compare personal loans.

For example, if a personal loan has an interest rate of 11.35% p.a. and a comparison rate of 13.47% p.a. it means this loan includes a high amount of fees. If the loan has an interest rate of 10.13% p.a. and a comparison rate that is the same, it shows that there aren’t fees included in the loan.

RateSetter’s personal loan comparison table makes this process easier for you by allowing you to compare over 20+ providers side by side.

Always make sure you are comparing loans that are like-for-like. That means each product has the same loan term, loan amount and loan types (e.g. secured vs unsecured).

Other factors to consider

Comparison rates are a good starting point, but you still need to decide what will work best for you.  The costs involved are a major factor, but once you have shortlisted a few loans with similar costs, there are some other things to check out.

  • Are there flexible repayment options? Usually, you can choose between weekly, fortnightly or monthly repayments according to what suits your pay cycle. However, not all lenders offer this. Compare a loan’s conditions and fees around making extra repayments and paying the loan off before the end of the term.
  • Can you use the funds for what you need? You can’t always use the borrowed money for whatever you like, particularly if you’re taking out a Secured Loan. For example, if you are taking out a car loan, you’ll only be able to spend the loan funds on a vehicle purchase and the vehicle needs to be eligible according to the particular lenders’ criteria (such as new, secondhand, age). Some lenders don’t allow you to take a personal loan for business purposes. Make sure you can use your loan how you need to.
  • What are the options for managing the loan? Check and compare how easy the loan will be to manage. The option to manage your account online is often available but not always. Using direct debit for repayments is common, however, if it is not manually paying is less convenient. It also increases the likelihood of late payments if you aren’t super disciplined.

How do I apply for a personal loan?

Applying for a personal loan is quicker and easier than you might think.

Am I eligible?

Whether or not you are eligible to get a personal loan, and how much you can borrow, varies from lender to lender, from loan to loan.

At a minimum, you need to: 

  • Be at least 18, sometimes 21 or over 
  • Be an Australian citizen or permanent resident, although some lenders do loan to people on temporary work visas such as 457 
  • Be earning at least $25,000 per year, sometimes more, from a regular source of income that you can demonstrate
  • Have at least a provisional or full driver’s licence

Some lenders, although not all, will consider:

  • Applicants with existing loans or debt (there may be fewer options)
  • The self-employed, usually with additional criteria 
  • People on a low income, the pension or Centrelink payments

Be sure you check the eligibility criteria for any lender you are considering to avoid impacting your credit score on an application you would never have been approved for.

What is the process?

Once you have shortlisted lenders you can usually get a quote or estimate of your estimated borrowing power and some loan options, before you apply. 

Depending on the lender, you can then apply online, over the phone or in-person if the lender has physical branches. You’ll usually need to verify your identity, connect to your online banking to verify your income and expenses and potential provide additional information based on your loan purpose.

If approved you’ll need to accept your loan agreement. The majority of personal loans can be signed and accepted electronically.

What documents will I need to apply?

Which documents lenders need to process your application vary, but usually it will include:

  • Proof of identification: Australian drivers licence or a passport and some bills for proof of your address. 
  • Verification of your income: Payslips, bank statements or tax returns.
  • Show your expenses and liabilities: Via bank, credit card and loan statements.

Some lenders, such as RateSetter, have a streamlined online portal, where you can connect to your bank and share your data securely. This makes the process much quicker and easier.

What will your lender consider?

Your lender will review:

  • Your employment stability
  • Your income (eg salary, rent, interest etc)
  • Your expenses (eg mortgage, groceries etc)
  • Your repayment history
  • Credit agency/bureau information  (Credit Report and Score/Rating)

These determine if you’ll be approved and for how much. If you’ve had problems paying your bills and debts in the past, you may only be offered loans at higher rates.

How do I improve my chances of getting approved?

Applying for a personal loan has the potential to impact your credit score, particularly if your application is declined. It’s therefore important that you put your best foot forward before beginning the application process. We’ve assembled a useful selection of tips to help you submit a strong loan application.

Make sure you pay your existing debts on time. Did you know that repayments that are more than 14 days late may be recorded on your credit file? While less serious than a default, a series of late repayments can have an equally negative impact your credit score. Making late repayments also sends a bad message to a prospective lender and may result in you paying higher interest rates. If you do ever find yourself behind on your repayments, it’s important you contact your lender directly. Working with your lender toward a mutually beneficial outcome can help to protect your credit score. Remember, it’s far easier to protect a good credit score than it is to bolster a weak one.

Only request as much as you need to borrow. When assessing your application a lender will look at whether you can service a loan. What this means is that, after all your expenses, do you have income left over to meet the repayments of your proposed loan. If you request an amount that is more than your finances say you are able to repay, it’s highly unlikely you will get approved. In some cases, a lender may offer you a longer loan term to reduce your repayments but it’s best to do your homework first. Use a repayment calculator and budget to figure out what you can reasonably afford.

Review your credit history. Australia has three main credit bureaus, Equifax, Illion, and Experian. You can request a free copy of your credit score once a year. Once you’ve verified your identity (i.e. with a driver’s license, passport etc.) the bureau is required to provide you with your credit report within 10 days. Your credit report will provide an overview of your credit history, including previous loans, existing debts, and your performance as a borrower. You should ensure all the information contained in your credit report is accurate, and if not, contact the bureau to have it remedied. This will have a direct impact on your credit score. If you’re unsure of how to interpret your credit score, see this ASIC guide.

Pay down existing debts. Lenders may look unfavourably on an application for individuals with large amounts of debt, particularly if the debts are already at the limits of what you can afford. It’s important to demonstrate a concerted effort to repay your existing debts to a reasonable level. This applies, even if your personal loan is for the purpose of consolidating your debt. While a move to lower interest rates makes sense, it may be harder to get approved unless you’ve opened up some additional capacity between your income and expenses.

Minimise your credit card balance. Using a credit card can be a great way to help boost your credit rating by demonstrating you are financially responsible. However, you need to manage your credit card carefully to ensure your balance is consistently low. Failure to make repayments can have an equally negative impact on your credit score. Finally, lenders are now required to assess your application based on your credit card limits, not the outstanding balance. If you have unused cards or excess limit.

At RateSetter, we assess your loan application in line with our credit criteria and our responsible lending obligations. Whilst no guarantee, following the tips above will go a long way to improving the prospect of successful loan approval.

How long will it take to get approved?

You may have your personal loan approved within a minute or it can take as long a couple of weeks! Most digital lenders process and approved applications with 24 hours provided all documents have been submitted. If you are approved the funds will usually be deposited in your nominated everyday account or paid out directly to a nominated party (e.g. car dealer, credit card provider etc). This will generally take one business day.

Sebastian Paulin
Sebastian has over 12 years experience in consulting, marketing and finance. He has worked with Australia’s largest banks and emerging fintechs across lending, investing and insurance. Sebastian has a Bachelor of Commerce and Bachelor of Laws with Honours.

Personal Loan Frequently Asked Questions

Why does my credit score matter?

Lenders check your credit score and your credit report, which outlines your borrowing and repayment history. They do so to gauge how much risk they are taking on by lending to you. If they believe you are likely not to pay back your loan, they may either decline the loan or offer it to you with a higher interest rate and fees. The rating is a summary, in the form of a number, which factors in the following: 

  • How much money you’ve borrowed in the past
  • How much credit you currently have
  • How many, and what type of credit applications, you’ve made. This can now include payday loans and buy-now-pay-later (BNPL) services such as AfterPay.
  • Whether you pay on time 
  • Any loan defaults or bankruptcy 
  • Court judgments  
  • Information from your bank, telco, insurance and utility companies
  • Your age, address and employment situation
  • Up to two years of your history

It is worth checking your credit report (you can do so for free), you may be able to get errors, that are hurting your score, corrected.

Will checking my credit score negatively impact my credit rating?

You can get a free copy of your credit score and report from one of the credit reporting agencies, also known as bureaus. This does not impact your rating. Some of the agencies put limits on how often you can do this for free. Australia’s major credit rating agencies are Equifax, Experian or Illion.

Will getting a quote or applying for a personal loan negatively impact my credit rating?

When you apply for forms of credit, such as loans and credit cards, the lender needs to submit a credit enquiry and request your credit file. This request for this information will be recorded – regardless of whether or not you are approved.

In the case of lenders that offer risk-based pricing, getting a quote for a personalised rate may not be recorded. For example, with RateSetter you can get a RateEstimate, where we will request a copy of your credit file as an ‘access seeker’ (also known as a soft credit check). A soft credit check is only visible to you and other access seekers, will not be visible to other credit providers and does not impact your credit score.

How do loan repayments work?

When you are setting up your loan, a loan repayment schedule will be created with your minimum repayment amount each period. This is usually monthly, however, some lenders do offer weekly and fortnightly repayments if that fits your pay schedule better.

With regard to how repayments are managed each lender will be different. Some may set up a direct debit from a nominated account or you may have to set up an automatic transfer (make sure you allow for processing time). Some lenders also have an online portal to manage your repayments. Additional payments may be made, depending on the lender, via transfer, BPAY or even in-person. It’s important you always make sure you have enough in the account to cover the payments to avoid missed payment fees.

Can I get a personal loan if I’m self-employed?

Yes, the self-employed can get a personal loan. Sometimes the lender will require further information from you to make sure the loan isn’t too risky.

At RateSetter, if you are a self-employed individual you need to have been in your current role for at least 12 months. We ask you to provide us with your most recent individual tax return and the notice of assessment from the Australian Taxation Office. In some cases we will ask for two years of returns as well as more detailed information.

Can I get a personal loan if I’m a student?

Students may find it harder to get a personal loan, as lenders want to make sure there is not a risk of you not being able to pay it back.

If you can prove that you earn enough income and can afford the repayments as well as your expenses, some lenders might lend a limited amount. If you have an asset, like a car, you could look at a secured loan, where you use that asset as security. This does mean that if you can’t repay your loan, the lender may take your asset, to recover the money that is owed.

Can I get a personal loan with ‘bad credit’?

If you have in the past, paid debts late or even defaulted on loans, you may have what is known as a ‘bad credit history’. Lenders are generally less willing to give loans to these types of borrowers, as they believe the risk of it not being repaid is higher.

However, there are some lenders who will give personal loans to people with a less than perfect credit history. These loans might come with higher interest rates, higher fees or a lower amount that you are able to borrow.

If you have an asset, like a car, you could look at a secured loan, where you use that asset as security. This does mean that if you can’t repay your loan, the lender may take your asset, to recover the money that is owed.

How quickly can I receive my funds?

Every lender is different in how long it takes to process, approve, and for you to receive your loan amount. A personal loan will normally be one lump sum. If you need the cash within a certain time, it’s important you check with the lender before you apply.

At RateSetter, once we approve your loan application and you have accepted your loan contract, we will transfer the funds the following business day. You should receive the funds into the account that you have nominated within one to two business days.

Are personal loans tax deductible?

In most cases, the loan amount or the interest on a personal loan is not tax-deductible. There may be an exception for interest on a loan where the loan has been used to generate income. Before you make decisions based upon tax deductions, it’s important you consult your registered tax agent.

What do I do if I’m having trouble paying my loan?

If you are finding it difficult to make your regular personal loan repayment, it is best to contact your lender sooner rather than later. They may have some options to help manage your payments or offer you a payment plan (sometimes called a hardship agreement). We recommend that you do this before you miss a repayment because late or skipped payments may look bad on a future credit report. The National Debt Helpline provides free financial counsellors that can help you manage your money, including creating a budget.

What’s the difference between payday loans and personal loans?

Short term loans are also known as payday loans. These are a type of personal loan but are short term, high-cost loans for access to small amounts of money. The key differences are:

  • The amount you can borrow. Personal loans are for a minimum of $2,001 usually to pay a specific expense or purchase. Payday loans range from $100 to $5,000 and designed to cover a shortfall in your expenses.
  • The costs of borrowing. In general, the interest rates for payday loans are significantly higher, you really need to be able to pay it back as soon as you get paid (hence the name). There are extra fees and large penalties for missed payments.
  • The timeframe for repayment. Personal loans are generally paid back over one to seven years with the amount of interest reducing as you pay down the loan. A payday is between 16 days and one year, however often the longer you take to pay it back the higher the fees and interest.

A payday loan may be available to those with bad credit as the lender will usually want to know about your employment and income status, rather than your credit history. Payday loans are generally a last resort for credit and can result in borrowers becoming trapped in a bad credit cycle.

Complex words, simply explained.

At RateSetter it’s our job to speak to you like a real person. The finance industry can, however, be complicated by technical terms and language that is hard to avoid. We think you should know what these words really mean, so we’ve done our best to provide you with simple, easy to read explanations.

Glossary of terms

Applications Fees. Application fees are a once-off fee to apply for and set up a loan, that is not refundable. These may also be called establishment fees, up-front fees, start-up fees, or set-up fees.

Asset. An asset is something of value that you own (such as a car or property). Assets can be used as ‘security’ also known as ‘collateral’, meaning the banks can repossess this if you can’t repay your debt.

Balloon Payments. Used in car loan and leasing, a balloon payment is when you opt to pay a larger lump sum at the end of the loan, in return for lower monthly repayments. The overall cost of a loan with balloon payments might be higher.

Comparison Rate. The comparison rate shows the overall cost of the entire loan. It includes the loan’s interest rate and most fees, which is then expressed as a single percentage of the entire amount borrowed.

Credit Score (Credit Rating). A Credit Rating or Credit Score is calculated by a credit rating agency or bureau based on information in your credit report and is a number that sums up the reliability or risk that you pose as a potential borrower.

Credit Report. A credit report is put together by a credit rating agency or bureau and outlines important information from credit card providers, lenders, and utility service providers. Lenders access this to decide whether or not to lend to you. You can request a free copy.

Credit Reporting Agencies or Bureaus. Credit agencies collect and share credit history information. Lenders get reports and scores from them in order to assess applications for loans or a credit card. The credit bureaus will provide you with a free copy of your credit report and score upon request.

Comprehensive Credit Reporting is relatively new in Australia. It allows a more detailed level of information about a loan applicant – both positive and negative – to be shared by Credit Rating Agencies.

Debt Consolidation. If you have multiple debts, such as loans and credit card bills, you can take out a personal loan to pay all of these off. This can save you on interest and fees.

Debt Consolidation Loan. A debt consolidation loan combines existing loans and credit card debt and puts it into one loan payment. The idea is to reduce the interest rate and fees that you’re paying, so the debt can be paid off quicker with a lower overall cost.

Default. A default is when someone cannot or will not pay a debt, including a loan over a period of time, not meeting the agreement of the loan. This might result in court action or repossession of assets depending on the loan.

Depreciation. Depreciation is when an asset’s value goes down over time. If it goes up it appreciates. A car is likely to depreciate over time, a house may appreciate over time.

Early Repayment. Early repayment is when you pay off the balance of the loan before the Loan Term. Some lenders charge fees for this.

Establishment Fees. Establishment fees are a once-off fee to apply for and set up a loan, that is not refundable. These may also be called application fees, up-front fees, start-up fees, or set-up fees.

Exit Fees. Exit fees are charged by the lender when the borrower leaves the loan earlier than the agreed loan term, either due to ‘early repayment’ or refinancing.

Fixed Interest Rate. A loan with a fixed rate has the interest rate set for the entire loan. This may be a higher rate but enables the borrower to know exactly how much they are repaying for the entire life of the loan, or for a pre-determined portion of the loan e.g. 5 years.

Green Loan. A green loan is when a lender gives a lower or discounted rate on a loan with a specific environmental benefit.  Examples include buying an eco-friendly car (such as a hybrid or electric vehicle) or taking out a personal loan to install solar panels or home batteries.

Interest Rate. The interest rate is the percentage on top of the original amount borrowed that you will have to pay back. The interest rate might be fixed or variable.

Lender. A lender is any licensed institution offering financial products. This might be a bank, credit union, peer-to-peer lender, marketplace lender, neobank or online financial institution.

Line of Credit. A line of credit is a type of loan, that works like a credit card, giving the borrower ongoing access to money.

Loan Amount. The loan amount is the sum of money that is borrowed from the lender.

Loan Term. The loan term is the length of time in which the loan is to be repaid.

Loan to Value Ratio (LVR). The Loan to Value Ratio is the loan amount divided by the value of the asset. Usually, lenders like to keep it the loan amount over 80% of the value of the asset it is secured against.

Once-off Fees. Fees that you have to pay at the beginning of the loan, that only occur once, and covers the application or set-up of the loan or registration of an interest in an asset used as security. Once-off fees vary depending on the lender. Also called upfront, establishment, application, documentation or set-up fees.

Ongoing Fees. Ongoing fees are paid, usually monthly, throughout the life of the loan — without reducing the amount that you owe. These vary greatly from lender to lender. Also known as account keeping or loan management fees.

Peer to Peer Lender. A peer to peer (P2P) lender matches everyday investors’ funds with borrowers via an online platform.

Penalties. Any fee or charge applied to the borrower for a breach of loan terms, for example, late repayment.

Repayments. Repayments are the amount that you will need to pay off the loan (interest is included) for the duration of the loan.  These are often monthly but may also be weekly or fortnightly.

Repossession. A lender with security has the right to repossess (take ownership of) a borrower’s asset, like a car, if they cannot pay their loan debt. This is usually only if it is for a ‘secured’ loan, where the borrower has nominated that asset to be used as security for the loan.

Risk-Based Pricing. Risk-based pricing is a personalised rate that a lender offers a borrower based on their credit history.

Secured Loan. A secured personal loan is when the borrower puts up an asset (such as a car) as security for the loan. The bank can sell this item to get their money back if the loan isn’t paid back.

Upfront Fees. These are the fees that you have to pay at the beginning of the loan, that only occur once, and covers the application or set-up of the loan. Upfront fees vary depending on the lender. Also called once-off, establishment, application or set-up fees.

Unsecured Loan. Any loan where the borrower does not have to put up any assets as security. This type of loan may offer higher interest rates and lower borrowing amounts. In Australia, a lender may still have recourse to a borrower’s assets in the event of default but this would need to be initiated via collection, court or bankruptcy proceedings.

Variable Interest rate. A variable (changing) interest rate, means a loan’s interest rate will go up and/or down as market conditions change and/or lenders cost of funds change. It is difficult to predict what interest rates will do, especially over a number of years.

This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of RateSetter as at the date of publication and may later change without notice.

Representative Example: Based on a loan of $10,000 over 36 months a borrower with an excellent credit history can expect to pay a total of $11,362 with a RateSetter personal loan. This represents a comparison rate of 8.46% p.a. and includes all interest and fees included in your loan repayments over the life of the loan. RateSetter personal loans are available for a minimum of 6 months to a maximum of 5 years. Interest rates range from 6.49% p.a. (comparison rate 8.46% p.a.) to 12.79% p.a. (comparison rate 22.92% p.a.). Rates are subject to change depending on the rates offered in our Lending Markets.