Compare Australian Personal Loans

A personal loan allows you to borrow a lump sum of money and then repay that amount (plus interest on top) in instalments over a set period of time. Personal loans tend to be cheaper on average than say, credit cards, which are seen as a typical alternative. 

A personal loan can be useful for lump sums between $2,000 and $100,000, which are too big to put on a credit card. It’s also useful because as long as you meet your monthly repayments, you’ll know how long you’ll have debt and approximately how much interest you’ll pay from the beginning. 

In Australia, personal loans can be used for pretty much whatever you need, though they are commonly used to fund an expensive item like a holiday, home renovation or new car. Personal loans can also be used to consolidate debt and to pay for unexpected expenses like medical bills. 

 Typical loan sums are between $2,000 and $100,000. While a lender may approve you for a considerable loan amount, that doesn't mean you should automatically take out that entire sum. Use Mozo's budget calculator to get a clear picture of your financial situation and work out how much money you have to play with after all your expenses. 

As of March 2021, Australian Military Bank, Credit Union SA and Transport Mutual Credit Union offer the lowest personal loan interest rates in the Mozo database (Please note: these go across different loan categories and aren't all the same). Smaller mutual banks and credit unions are still where it’s at if you’re after a more competitive rate. Check out our comparison page to see how big banks stack up against small lenders and to find a loan that might suit your needs. 

According to Mozo's analysis of the personal loan market for the 2021 Mozo Experts Choice Awards, there are several loans of note. Some award winners offering the best value in 2021 include: Australian Military Bank, Alex, Endeavour Mutual Bank, ING and Hume Bank.  To learn more, you can read product reviews of Australia's Best Personal Loans or view the full list of Mozo Experts Choice Personal Loan Award winners.

This will depend on the type of loan you apply for. If you apply for a secured personal loan, you will have to provide an asset, like a car, to use as security against the loan. Although this does give your lender the right to repossess your asset if you default on the loan, the good news is secured personal loans typically come with lower rates.

On the other hand, if you opt for an unsecured personal loan, you won’t have to provide any security. However, unsecured personal loans usually come with higher interest rates.

In our personal loan table at the top of this page, the comparison rate sits to the right of the interest rate and is a quick way of comparing the cost of the personal loan once both the interest rate and fees are combined. The comparison rate is often coined as showing the 'true' cost of a loan.

There’s no easy answer to this question, as it will depend on your financial circumstance and what you’re looking for. So to help you make a decision, we’ve jotted some pros and cons for different types of lenders.

Big banks

This includes the big 4 banks, Westpac, ANZ, NAB and CommBank, plus other major lenders like St George, Bankwest, HSBC and ING.

• Pros: One of the big benefits of going with a major bank is that you’ll be able to visit a local branch and speak to someone in person if you ever have an issue, which is not the case with some smaller or online lenders.
• Cons: On the other hand, big banks generally charge higher fees and may not offer the most competitive rate on the market.

Credit Unions

An alternative to the big banks are credit unions. These are not for profit organisations that are funded by their members. 

• Pros: Rather then passing profits back to shareholders, credit unions return their profits back to their members in the form of competitive rates and fees. 
• Cons: However, in order to have access to these competitive rates, you will need to become a member and often pay a small fee.

Peer-to-peer (P2P)

A new type of lender shaking up the market are peer-to-peer (P2P) lenders. P2P operates on a different platform to traditional banking in which it connect investors with potential borrowers in an online marketplace. 

• Pros: For a borrower, this means competitive rates and fees, while not having to deal with a financial institution. 
• Cons: But you should know that P2P lenders set their rates on a tier based systems, meaning if you’ve got a clean credit history, you’re likely to get a better rate.

One misconception about personal loans is that applications can take a while to process. In reality, finding a fast personal loan is possible, and some lenders can have the funds in your bank account on the same day or within 2 business days.

While many lenders will offer different repayment schedules, personal loan repayments can typically be made on either a weekly, fortnightly or monthly basis. One easy way to make your repayments is to set up a direct debit from your bank account, this will also help ensure you won't ever miss a repayment or be charged a late payment fee.

But if for whatever reason you think you won’t be able to make a repayment, you’ll need to contact your lender ASAP to discuss an alternative arrangement.

If you are looking at borrowing a small amount, say under $5,000 and are tossing up between plastic or a loan, here are some things to consider:

Personal Loans

• Pros: Taking out a personal loan is a good option if you need a set amount of money upfront and plan to pay it off in an agreed timeframe. Plus the regular monthly repayment amount of a fixed interest rate personal loan makes it easy to budget.
• Cons: If you want to pay off your fixed rate loan early you may incur a break cost fee.

Credit Cards

• Pros: An interest free credit card can be a good option for smaller expenses like a holiday or outdoor reno, as you have the flexibility to pay as you go.
• Cons: 0% intro credit cards often revert to a much higher rate once the "honeymoon" period has come to an end. So if you can't pay off the full balance before the interest free period comes to an end, you could feel the bite of high rates and end up paying more than with a low rate personal loan.

Personal loans are there to help you fund purchases that make more sense for you financially to pay off over a period of time than wait until you have the money saved upfront. This is why personal loans are a good option for Australians who want to purchase a new car, do a small home renovation like a kitchen or outdoor entertainment area or pay for a once off expense like a wedding.

Lenders generally don't have many restrictions on what you can use a personal loan for though you will be asked the purpose of the loan when you apply. The key think for a lender is making sure that you can meet repayments over the loan period. But a personal loan shouldn't be seen as way to supplement your salary to pay for everyday expenses. You'll want something to show for the money you've borrowed.

For some purchases, there are lenders that will actually give you a better interest rate than a regular personal loan. For instance, if you are planning on buying a new car, you'll find that many lenders will have sharper rates for new car purchases when you secure the car against the loan. Another loan purpose that is getting more popular with lenders in Australia is eco home improvements such as rainwater tanks, solar panels, insulation. Lenders view borrowing in these areas as smart investments and reward customers with lower interest rates. Check out the Mozo Experts Choice Personal Awards page to see which Australian lenders have received our expert's tick of approval.

While you are still usually able to get a personal loan with bad credit, it’s not always the best idea as you’ll often be charged super high rates and fees. Thanks to the rollout of comprehensive credit reporting (CCR), many lenders have already begun assessing a borrower’s credibility based on their credit history.

In this case, it could be worth repairing your credit history first before applying for a loan.

Yes, some providers offer personal loans to students, but you’ll find there is a slight difference in terms of eligibility. With a student personal loan, there’s a little more flexibility with the loan application since students generally have lower incomes and little to no assets, compared to a borrower working full time and no longer studying.

But although approval for student personal loans does come with some breathing room, lenders tend to be a little stricter in terms of repayments and may only offer smaller loan amounts, to hep make sure you can comfortably pay back your debts.

Yes, pensioners can take out a personal loan, but it can be tricky to get approved. If you are a pensioner looking to take out a personal loan, you’ll find that there are limited options. This is because it’s harder to prove to a lender that you can make your repayments if you no longer have a regular income. If you are struggling to get approval from a lender, you may want to consider Government Assistant Options.

However, if you’ve got some extra cash stashed away in an account that can be put towards your repayments, you might be in a better position to negotiate with a lender and have better chances of success.

Australia is in the process of moving towards a comprehensive reporting system which enables lenders and other businesses to see your whole credit history when making a judgement on whether to lend you money. In the past, banks were only ever interested if you had missed a repayment or defaulted on a loan. Now they are able to get a sense of your whole financial picture such as when you make your bill repayments, whether you pay the whole bill or only part of it, how much of your credit limit you have available etc. The positive to this is that it rewards people who can demonstrate good savings and financial behaviour. Lenders can see that you will be able to pay back any money borrowed, in the timeframe that you said you would.

So now, when it comes time to thinking about getting a personal loan you really need to be much more prepared in the lead up by making sure your bills are kept up to date, you're demonstrating good savings habits, and comfortably meeting other financial commitments.

Before you apply for a loan, it's a good idea to get a copy of your credit report so that you can check it for any errors or know the areas that you might want to improve before you ask the bank for a loan.

There is no way of guaranteeing that you will be approved for any loan. All you can do is make sure that you've got the highest chance possible this means:

• Crunching the numbers upfront. There is no point shopping around car yards looking at $40,000 cars if you can only afford to borrow $20,000. You need to know how much you can realistically afford to borrow and choose a time frame that will allow you to pay the loan back comfortably without causing financial stress. The good news is that most personal loans these days allow you to make additional repayments or pay out the loan early without penalty so you can always put more towards the loan if you choose.
• Demonstrate good savings habits. Lenders want be confident that you can set goals and make payments towards these. Start by putting away money each week into a savings account, equivalent to what your repayment amount would be to demonstrate to yourself (and the bank) that you'll be ok with the responsibility of repaying the loan.
• Keep on top of your bills. You know that a potential lender will be looking at your credit score so don't give them an excuse to knock you back. Keep your credit file in the best health possible by making sure you stay on top of bills, rent and expenses. Even if you have not done this in the past, this isn't a reason for you to be rejected. If lenders can see that you are making positive changes to the way you manage your finances they could be more likely to approve you now that comprehensive credit reporting is here, than in the past.

With most lenders now offering online loan applications, applying is pretty easy. In some instances you can even get the funds directly deposited into your account within a few days of loan application.

To make your personal loan application go as smoothly as possible, it's a good idea to have some of the essential information handy and that you'll meet any eligibility requirements.

If you are apply for a loan with a provider where you don't already have a personal history with, its likely that you'll need to supply them with personal information and identification details. Examples of this kind of information will be drivers licence number, passport details and utility bills in your name that show your current address.

Other information you are likely to need includes:

• Proof of income (recent payslips or tax return)
• List of other assets and liabilities
• Proof of employment
• Loan amount and loan term requested

If you come to find that you have been rejected for a personal loan, do not apply immediately for another. Each time you’re rejected for a loan it will go on your credit history, which makes it even harder to get approval next time.

The first thing you’ll need to do is assess why you’ve been rejected. Some of the more common reasons for being rejected include a bad credit history, low income, unstable employment or for having too many loans already. These are all things that might impact your ability to repay your loan in the future.

Your next step should be to make adjustments to your application to ensure that you aren’t rejected again. This could mean cleaning up your credit history, reassessing your budget and borrowing capacity to make sure you can afford the loan or by trying to add a little more to your savings stash.

The thing to remember about any kind of personal credit, is that you will have to pay the money back eventually. Here are some tips to help you avoid some of the biggest borrowing traps:

• Borrowing more than you need. Like the idea of a round the world first class trip, so do we, but just because the bank says you can borrow $50,000 to do it, it doesn't mean you should. Once that money is in your bank account it can be hard to stop the spending, so be really hard on yourself at the start of the process and only borrow the minimum amount you'll need and try and pay for any extra with savings.
• Spending money on other things. Say you've budgeted $10,000 for a new deck and BBQ area, got your loan sorted out and the funds in your bank account. The quotes come in and it's $2000 cheaper than you expected. It can be pretty tempting to then use that money saved on other purchases but rather than falling into this trap out the money straight back into the loan by making a lump sum repayment. If the loan you choose has a redraw facility if you need to use this money later on down the track you can but don't pay interest on money you don't need.
• Being late with repayments. We all lead busy lives and it can be hard keeping track of repayment dates which is why you shouldn't. Online banking, direct debit and payment notifications mean that you don't have to keep track anymore. You can either choose to have the bank take it out of your account directly or alert you when your payment is due. Not only will you avoid paying a late fee this way but you'll also keep you credit file squeaky clean.
• Not fully understanding joint loan applicant responsibilities. A joint personal loan can be a good way to fund purchases that you may not be able to get on your own, but with a combined income you can. But if you do take out a joint loan, it is important to realise that you will have responsibility of repaying the loan even if the joint applicant can't. Be sure that you read the terms and conditions around any joint loan before signing on the dotted line.
• Paying more interest than you need to. One of the best things about the Australian personal loan space is that there are many lenders to choose from. And with all this choice, means competition for your business. Don't get stuck paying high interest rates when you don't need to. The lower the interest rate, the lower your repayments so do yourself a favour and shop around.