Personal loan comparison today, jet ski tomorrow

What is a personal loan?

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).

Basic features of a personal loan

• Loan terms. A personal loan term is usually between 1 and 7 years. Longer loan terms mean you pay more interest, shorter loan terms increase your monthly repayments.
• Personalised interest rates. Many lenders determine your personal loan interest rate based on your credit score, income and other factors.
• Loan purpose. A personal loan can be used "for any worthwhile purpose". But you can't use a personal loan to gamble or invest.

How do I compare personal loans?

• Look for a lower interest rate. The lower the rate, the less interest you pay. Most personal loans have variable rates, but some offer fixed rates. Make sure you compare personal loan products to find the lowest rate possible.
• Look for a loan with lower fees. Factor in the cost of any application or establishment fees, plus the ongoing monthly service or account fee. You can spot a loan with high fees by looking at the comparison rate.
• How big will your loan be? You won't be able to borrow $30,000 if the lender's maximum loan amount is $25,000.
• Consider your loan term. Most lenders offer terms of 1 to 7 years. Longer terms mean lower monthly repayments but you end up paying more interest. Shorter terms mean less interest and you'll pay off the loan faster, but you pay more each month.
• Other features. Some lenders let you repay the loan faster, so you can get out of debt quickly. Some even let you redraw those extra repayments to spend in an emergency. Other popular features include a lender's app, which can make it easier to track and manage your debt.
• Be aware if any break fees or early repayment fees apply to your personal loan in the event you pay out your personal loan earlier than the original loan term.

Personal loan rate update: August 2024

• Lowest unsecured personal loan rate: Harmoney Unsecured Personal Loan: 5.76% (comparison rate 6.55%).
• Lowest secured personal loan rate: Illawarra Credit Union Secured Fixed Rate Personal Loan (New): 6.00% (comparison rate 6.64%).
• Average unsecured personal loan rate in Finder's database: 11.18% p.a.
• The average Australian with a personal loan borrows $7,683 with a 3 year term.

Market update by Richard Whitten – Finder money editor

How do I know what my personal loan repayments will be?

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.

Compare personal loan types

Unsecured personal loans

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.

Secured personal loans

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.

Car loans

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.

Debt consolidation loans

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.

Bad credit loans

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.

Is a personal loan right for me?

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.

Comparing personal loans to other forms of credit

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:

• Credit cards. A credit card lets you spend money flexibly, up to an approved limit, and pay it off over time. If you manage your card well, it can be a good form of credit. For smaller purchases it could be cheaper than a personal loan. But if you don't stay on top of your repayments, you'll end up paying a high interest rate month after month.
• Buy now pay later (BNPL). Many Australians use BNPL to cover small purchases in a similar way to a credit card. BNPL services are easy to use and don't charge interest, which can be a trap. You have to pay fees, and if you miss repayments then you'll get hit with more fees.
• Pay on demand. Pay-on-demand platforms let you access a portion of your salary before payday, but you'll pay a fee to do so. This might be a convenient short-term solution but if you find yourself repeatedly accessing your salary early and paying a fee to do so, you could find yourself falling further behind financially.
• Payday loans. These are short-term loans limited to $2,000. They are an emergency option but an expensive one. Payday lenders don't charge interest but instead charge hefty fees.

How to apply for a personal loan

• Compare personal loan products. You can use our table to find one that suits your needs and has a low interest rate.
• Check the lender's eligibility criteria. There's no point applying for a loan you can't get. Make sure you meet the employment, residency and income requirements.
• Check your credit score and get a quote. Knowing your credit score helps set your expectations for what interest rate you'll be offered and helps you spot ways to improve your score. Lenders can also provide quotes to give you an idea of your loan.
• Submit your application. You'll need some ID and details about your income, spending and employment.
• Wait for approval. Most lenders can process a personal loan application within 1 business day. Some can do it in hours.

Documents you need for your personal loan application

• ID. A driver's licence, Medicare card, passport or birth certificate.
• Proof of income. Payslips, bank statements, a tax return or letter of employment.
• Other debts. You may need to provide an account statement from other debts you have, including loans or BNPL accounts.
• Security. If the loan is secured you'll need to provide some details about the car or asset offered as security. This can include a tax invoice from a car dealership and evidence of a car insurance policy.

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.

— Raj Lal, publisher

Why compare personal loans with Finder?

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FAQs about personal loans

• What is the average interest rate on a personal loan in Australia?

  The average interest rate for unsecured personal loans in Australia is 11.18% p.a (as of June 2024). This is the average rate taken from Finder's database, based on an individual with Excellent credit.

  Your own credit score, and therefore the rates you are offered, may differ.

• Which bank is best for a personal loan?

  There's no simple answer for which bank is best for your personal loan. Your credit score and relationship with the bank will impact the rate you are offered. Comparison tables can help you understand the full interest rate ranges banks offer. It's best to see which is offering the lowest rates, check to see if you match its eligibility criteria and then get a quote. It may also be worth looking at non-bank lenders, as they operate under the same regulation as banks and can have more competitive rates.

  For a quicker answer, Finder has done its own research into our top picks for the best personal loans.

• Should I get a personal loan from a bank or online?

  Whether you get a personal loan from a Big Four bank, a smaller lender or an online lender, you'll most likely be applying online anyway.

  Here are your main lender options:

  • Big Four banks. If you already bank with CommBank, Westpac, NAB or ANZ then it can be easier to get a personal loan approved. And you'll have all your accounts in one place. Keep in mind that the Big Four may have less competitive rates than online lenders.
  • Other banks and institutions. Smaller than the Big Four, banks like ING, Bendigo Bank, Bank of Queensland and many others offer personal loans. Then there are financial service companies like Latitude that specialise in personal lending.
  • Online lenders. There are many online lenders that offer personal loans with fast approval times and competitive interest rates. Examples include Humm, Harmoney, Now Finance and Wisr.
  • Credit unions. These member-owned organisations are similar to banks but are often more local and smaller. Credit unions offer personal loans that sometimes have quite competitive rates. Some offer online service while many have physical branches in certain towns and cities.

• How much can I borrow with a personal loan?

  Most unsecured loans offer amounts between $2,000 and $50,000, while secured loans offer up to $100,000. But the actual amount you can borrow depends on factors including your credit score and ability to make repayments.

• What is a good rate on a personal loan?

  A good unsecured personal loan interest rate is around 7–15% for people with an Excellent credit score. Personal loans use your credit score to determine the rate, with higher scores leading to lower rates. As a guide, Finder analysis shows most Australians have a Good or Very Good credit score.

• What credit score do I need for an Australian personal loan?

  An Australian credit score of 550 is generally the minimum you need to qualify for a personal loan. This will likely be an expensive loan, as most Australian lenders use risk-based pricing.

  Lower credit scores could qualify for payday or short term loans, though these will be more expensive than even a bad credit personal loan.

• How quickly can I get the money from my personal loan?

  It usually takes a few business days to get the money from a personal loan once your application is approved, but it does vary.

  Some banks are able to offer existing customers same-day personal loans.

  Some payday lenders also offer 1-hour turnarounds but these loans come with risks including higher interest rates and fees.

• How can I improve the chances of my loan being approved?

  There is no way to guarantee you're approved for a loan, but there are some key steps you can take before you apply:

  • Work out how much you can borrow. Lenders have criteria to decide how much you're eligible to borrow, but you also need to understand what is realistically affordable for you.
  • Maintain a good credit score or improve it. A lower credit score can reduce your chances of getting approved or mean you are offered a higher interest rate. If you already have a poor credit score, you can start improving it by limiting credit applications, paying bills on time and bringing down any limits on your credit card. It can take a while, but these are all good tactics to improve that credit score.
  • Keep track of your saving goals. If you manage to contribute to your savings regularly, it shows lenders that you are likely to manage ongoing loan repayments.

Aaron Christie-David, alongside his wife Bernadette, co-founded Atelier Wealth Mortgage Brokers in 2016. In this time, Aaron has earned recognition as an MPA Top 100 broker four times and garnered numerous industry accolades, including Brokerage of the Year (Australian Mortgage Awards), Customer Service Awards (MFAA), and NSW All Round Broker of the Year.

As a highly qualified and has a wealth of knowledge and experience in the finance industry, Aaron is also the author of The Happy Home Loan Handbook.

To make sure you get accurate and helpful information, this guide has been reviewed by Aaron Christie-David, a member of Finder's Editorial Review Board.

Written by

Richard Whitten

Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise

Richard has written 538 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips