unsecured personal loans

Unsecured Personal Loans

An unsecured personal loan means you don’t have to put up any collateral to borrow money. But because there is higher risk, you generally pay a higher interest rate. The idea behind an unsecured loan is that it can help you get what you need now, with a simple arrangement to pay for it over time. Start comparing unsecured personal loans from Australian lenders below.

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Unsecured personal loan comparisons on Mozo - last updated 24 May 2022

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  • Home Improvement Loan

    Fixed, Unsecured

    interest rate
    comparison rate
    Monthly repayment
    5.75% p.a.
    5.96% p.a.based on $30,000
    over 5 years

    Handypay offers flexible home improvement loans for Excellent Credit or better. Handypay is a specialist home improvement plan provider and offers loans up to $75,000.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 5.75% would cost $34,840.18 including fees.

    Compare
    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.35% p.a.to 19.09% p.a.
    6.14% p.a.to 19.99% p.a.based on $30,000
    over 5 years

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.35% would cost $34,832.61 including fees.

    Compare
    Details
  • Green Loan

    interest rate
    comparison rate
    Monthly repayment
    5.79% p.a.
    6.36% p.a.based on $30,000
    over 5 years

    Handypay offer flexible green loans up to $75,000 for Excellent Credit or better. Handypay is a specialist home improvement plan provider.

    Repayment terms from 1 year to 10 years. Representative example: a 5 year $30,000 loan at 5.79% would cost $34,873.55 including fees.

    Compare
    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    9.39% p.a.
    9.64% p.a.based on $30,000
    over 5 years

    Borrow from $5,000 to $50,000 with low rates for great credit. No account keeping fees. Free extra repayments and redraw facility. Same day approval may be possible. Winner of Mozo's Experts Choice Award for Australia's Best Large Credit Union 2021^.

    Repayment terms from 1 year to 7 years. Representative example: a 5 year $30,000 loan at 9.39% would cost $37,881.66 including fees.

    Compare
    Details
  • Personal Loan

    Variable

    interest rate
    comparison rate
    Monthly repayment
    5.75% p.a.to 25.99% p.a.
    6.68% p.a.to 29.2% p.a.based on $30,000
    over 5 years

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 5.75% would cost $35,370.18 including fees.

    Compare
    Details
  • Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.75% p.a.to 25.99% p.a.
    6.68% p.a.to 29.2% p.a.based on $30,000
    over 5 years

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 5.75% would cost $35,370.18 including fees.

    Compare
    Details
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FAQ

Unsecured personal loans: All your questions answered

If you're looking for a personal loan but can't make up your mind about whether an unsecured loan is the right pick for your situation, you've come to the right place.

Get familiar with the ins-and-outs of borrowing with an unsecured personal loan in this expert guide which covers everything from why your credit rating is important, to the features to look out for.

Show transcript

UNSECURED PERSONAL LOANS

Secured vs unsecured personal loans: what’s the difference?

Secured loans are secured against something you own, usually an asset like your car, house or high-valued items like art and jewellery.

If you don’t meet your repayments and default on the loan, your lender can seize and sell your asset to get their money back.

Sounds like too risky of a game? That’s when unsecured loans come in - they don’t require you to put an asset up as security

Instead, the lender takes a closer look at your finances, including your income and credit rating, to assess your capacity to repay the loan.

With unsecured loans, you can expect:

  • Higher interest rate and fees
  • Shorter loan term - around 1-7 years (vs up to 15 years for secured loans)
  • Lower loan amount cap - up to $50,000, with only a few that may let you borrow more

That’s because you’re considered a higher risk borrower, since the lender has more chance of potentially losing some of their money.

But keep in mind: this doesn’t mean you can get away with not repaying an unsecured loan, as the lender can still take you to court to recover their loss!

What is an unsecured personal loan?

An unsecured loan is a personal loan that lets you borrow money without having to put up an asset as security against it, such as your house or car. As the risk is higher for the lender, an unsecured personal loan may carry a higher interest rate, shorter loan term, and a lower maximum loan amount than a secured loan.

See how unsecured loans differ from secured personal loans.

What are unsecured loans used for?

Unsecured personal loans can be used for just about anything (within reason of course). So whether you want to renovate your kitchen, finance some extra study, facilitate your dream wedding or just jet-set around the globe for a stint, an unsecured loan could help you make your dreams a reality sooner. 

Another popular use for unsecured personal loans is debt consolidation. A debt consolidation loan combines multiple loans or credit card debts into a single personal loan in order to manage your repayments more easily and save on interest costs.

How do I compare unsecured personal loans? 

You can apply for an unsecured loan at banks and other non-bank lenders, so you’ll want to shop around and compare your options to make sure you find the most competitive loan for your needs. 

Key features of unsecured loans to compare include:

  • The interest rate

  • Application fee

  • Ongoing fees

  • Added features, such as the ability to make extra repayments or pay off the loan early without penalty. 

Many lenders will give you the option to choose a fixed or a variable rate for your unsecured personal loan. With unsecured loans there may not be a big difference between the interest rate of a variable rate loan and a fixed loan, the difference will be in the features like extra repayments, redraws and fees if you decide to pay out the loan early.

How much can I borrow with an unsecured personal loan?

In Australia, lenders will typically let you borrow anywhere from $2,000 to $70,000 with an unsecured personal loan, although some lenders cap the loan amount at $50,000 and a few will let you borrow $100,000 or more. For larger loan amounts, you may need to consider a secured personal loan. 

Unsecured loan terms are also often shorter (around 1 - 7 years) than they are for secured loans, which can reach up to 15 years.

Do I need security to take out an unsecured personal loan?

Unlike a secured loan, where you may receive lower interest rates and fees if you use your car or home as collateral for the loan, no security is required to take out an unsecured personal loan. This means you can still borrow money even if you don't have a car or property to use as security, plus your assets won't be in the direct firing line of the provider if you can't repay the loan. 

But, that doesn't mean there aren’t significant risks to consider. 

The catch is you may pay higher rates and fees. And keep in mind that you are not entirely scot-free if you can't meet your repayments and default on an unsecured loan, as the lender can still take you to court to recover their loss. 

Which is better: fixed or variable unsecured loan rate?

Pondering the age-old question "to fix or not to fix"? Well, there’s no catch-all for whether you should choose to fix your unsecured loan rate or not. You’ll have to weigh it up for yourself. 

Here's what you need to know about the two interest rate options to help you decide:

  • Fixed interest rate: With the rate locked in from the get-go, a fixed rate loan helps you to more easily budget for your fortnightly or monthly repayments, due to their consistency.  There are a number of extremely competitive fixed rate personal loans on the market, with rates very much on a par with variable loans. But fixed rate personal loans can sometimes have less flexibility, such as not giving you the ability to make extra repayments, and some even come with a break cost fee if you try to pay off your loan early.
  • Variable interest rate: A major draw of a variable rate loan is the ability to access more flexible options than you might not be able to with a fixed rate loan, such as free extra repayments and access to a redraw facility. Before choosing a variable loan however, make sure you can afford any potential rate rises. For instance, if you borrow $20,000 over 4 years and your 10% interest rate increases by 0.75 basis points, your monthly repayments will increase from $507 to $514. This might not seem like much but over 4 years that will cost you $347 extra in interest.^

When it comes to choosing between a fixed or variable rate, you're never going to be able to predict what will happen in the market, so it’s a good idea to choose the rate that works best for your circumstances and future adaptability.

What features should I look for in an unsecured loan?

Although interest rates and fees are the top two considerations for an unsecured personal loan, you should also look for features that could give you added flexibility and even help you say goodbye to your debt sooner. Here are a few to keep your eyes peeled for:

  • Extra repayments: Pay off your unsecured loan faster by ensuring you sign up with a loan that gives you the option of 100% free extra repayments. This will allow you to make lump-sum payments any time you like.

  • Redraw facility: Another feature that can come in handy down the track is a redraw facility that allows you to dip into any extra payments you've made. But keep in mind that redrawing your extra repayments undoes your progress towards paying your loan off sooner and saving on interest.

  • Choice of repayments: Some lenders give you a choice of weekly, fortnightly or monthly repayments, allowing you to choose the schedule that best fits your pay cycle or lifestyle.

Are there any unsecured loan fees I should be aware of?

Many borrowers make the mistake of focusing too much on finding the cheapest interest rate and forgetting to check what fees come with their unsecured loan. There are a number of fees that can sting unsuspecting borrowers, so here are the main ones to watch out for:

  • Upfront fee: In Australia, it's quite common for lenders to charge an unsecured personal loan application fee, and in some cases, these can be quite hefty. Fees can be an upfront charge, usually from $100 to $500 or more, or sometimes the fee is charged as a percentage of your loan amount. Some lenders don't charge application fees, so it's important to shop around. 

  • Account fees: Monthly fees for unsecured personal loans are typically around $10 a month, but many loans charge no account fee at all. If you're not keen on paying ongoing fees, look for a loan that has none.

  • Early repayment fee: Some unsecured loans charge a fee for repaying your loan earlier than the agreed fixed term. So if, for instance, you take out a 3 year unsecured personal loan but end up wanting to pay it off completely in year 2, you may be hit with a fee for doing this. These fees can be substantial, so if you think there's a chance you may be willing and able to pay off your loan early, it may be a good idea to choose one with no early repayment penalty.

An easy way to see how much an unsecured loan will cost is by looking at the comparison rate, which merges the interest rate with the fees to show you the 'true’ cost of the loan.

^Calculations as of 10 May 2022

Do I need a good credit rating to get an unsecured loan?

As you are not securing the loan with an asset, the only way a lender can determine how risky it will be to lend to you is through your credit rating. Because of this, a bad credit rating could make mainstream lenders knock back your application for an unsecured personal loan.  

Lenders often tier unsecured personal loan rates based on credit rating, so if you have an excellent credit rating you may be able to access lower interest rates than someone with an average or poor credit rating. Lenders will check your credit rating when reviewing your loan application, so it's important that you check your credit report prior to applying and ensure that all the information is correct. Also, be mindful that every personal loan you apply for will leave a mark on your credit report. 

Did you know you can get a free copy of your credit report each year? See here for details.

If you're smart about it and pay your repayments in full each month, an unsecured loan is a great way for you to build up a good credit history, which will mean when it comes time for you to borrow a larger amount for things like a house, it will be much easier for you to be approved for a home loan.

Is it hard to get an unsecured personal loan?

With no security to offer as a guarantee, getting approved for an unsecured personal loan can be more difficult than for a secured loan, as lenders generally have tougher lending criteria. To increase your chances of success, make sure you keep on top of any credit card and utility payments, reduce any credit card limits you don't use or need, be vigilant with your spending and diligently put aside money into your savings account. Anything you can do to show the lender that you're more than capable of repaying the loan will help.

Are unsecured loans better than credit cards?

Whether an unsecured loan or a credit card is better really depends on your financial situation and your money management ability. 

Unsecured personal loans let you borrow an agreed amount and make regular, fixed repayments over a period of time to pay it off, so if you've taken out a 3 year loan you'll be debt-free in 3 years. Credit cards, on the other hand, don't come with a set repayment plan, so if you're not careful you can end up in debt for decades.

Another plus for unsecured loans is that interest rates are usually lower than credit card rates. And if you have an excellent credit rating, you may be able to access even more competitive unsecured loan rates.

Lastly, with an unsecured loan you'll have the option of choosing a variable or fixed interest rate, unlike credit cards which only come with variable rates. 

For a full comparison, read our personal loans vs credit cards guide.

Which lenders offer unsecured personal loans?

When you start your hunt for a competitive unsecured loan, don't automatically go for a bank personal loan. There are plenty of other loans from online lenders, mutuals and peer to peer lenders with great rates and features, due in part to lower overheads and not needing to pay dividends back to shareholders.

To really get the lowdown on a lender, head on over to our personal loan reviews section where thousands of customers just like you share their experiences, from customer service, to the product fees and features.

How quickly can I get an unsecured personal loan?

Applying online for an unsecured loan is a fairly quick and easy process. Most online application forms take less than 10 minutes to complete, and some lenders even offer a 1-minute rate estimate. Once you've submitted your application, the lender will process it and let you know whether it's approved or not. This can happen in as little as 24 hours, and in some cases, you may even be able to get your funds on the same day.

How do I apply for an unsecured personal loan?

That’s easy. Once you have found the best unsecured personal loan for your needs on Mozo, you’ll be directed to the online application. Many lenders have fast 20-minute approvals so get all the info you’ll need like proof of employment, bank statements and utility bills, and apply.

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JP Pelosi
Managing editor

Jean-Paul (JP) Pelosi is an experienced journalist and editor who has contributed to many of Australia's leading media outlets including The Guardian, News.com.au, Domain.com.au, Investment Magazine and ANZ's Bluenotes. He has also edited news and communications for large financial services companies such as CommBank, Suncorp, Allianz and Amex. He loves a well told story and applying his editorial experience to content that readers both care about and enjoy. JP heads up our writing team.

Unsecured loans FAQs

How does an unsecured loan work? 

An unsecured loan is a type of personal loan that doesn’t require the borrower to put up an asset as collateral. Like other loans, a borrower must pay back their debt over a fixed period of time (usually between 1 and 10 years), making regular repayments that cover both the interest that is charged and the balance being paid down. In some cases, borrowers can make extra repayments and pay down their loan ahead of time. 

Do unsecured personal loans hurt your credit? 

An unsecured personal loan can both help or hurt your credit rating, it all depends on how you pay it back. If you are a responsible borrower and always make your regular repayments on time, and even make extra repayments too, this looks good on your credit history. Alternatively if you miss repayments or even default on your loan, this can negatively affect your credit rating and your chances of borrowing later. 

Can I get an unsecured loan with bad credit? 

Depending on your credit score and the lender, you still may be able to take out an unsecured personal loan with ‘bad’ credit. Many Aussie personal loan lenders offer risk-based pricing where lower rates are given to borrowers with an excellent credit history and higher rates to those with worse credit. While this does benefit those with healthy credit, in some cases it also provides borrowers with unhealthy credit the opportunity to borrow. In saying that, it’s always better to borrow when your credit rating is healthier because you are likely to get a lower interest rate. 

What can happen if you don’t pay back an unsecured loan? 

Unlike a secured personal loan, if you don’t pay back an unsecured loan the lender can’t repossess your assets. However, leaving an unsecured personal loan unpaid will damage your credit rating, which impacts your ability to borrow later on. Plus, the lender can also take legal action against you to make you pay back the loan. 

What are the advantages of an unsecured personal loan? 

The main advantage of an unsecured personal loan is that you don’t need to secure the loan with an asset like your home, car or savings. This means if you forfeit the loan you won’t have to forfeit any of your belongings. Another advantage is that your loan application may be approved faster, as the lender doesn’t have to evaluate an asset for security. Just remember though, because there is no requirement to put up any collateral, unsecured personal loans generally come with higher interest rates than secured options. 

What is a secured loan vs an unsecured loan? 

A secured loan is a type of personal loan that requires the borrower to put up an asset against the loan as collateral, in return for a lower rate. Alternatively, an unsecured personal loan doesn’t require an asset as collateral but often comes with a higher interest rate. 

Do banks offer unsecured personal loans? 

Yes, banks offer unsecured personal loans, as do credit unions and online lenders. Depending on what type of loan you are after, it may be beneficial to steer away from taking out a loan with a big bank as you may be able to snag a more competitive rate. 

Can I get an unsecured personal loan online? 

Yes, online unsecured personal loans are available to Aussie borrowers. With online loans, you can apply, get approved and manage your repayments all from your computer or even your smartphone. Plus, some of these types of lenders offer the most competitive personal loan rates on the Mozo database right now.

Personal Loan Reviews

St.George Personal Loan
Overall 8/10
Not bad but could be better

The interest rate does seem higher than other banks. I would love it to be more competitive

Read full review

The interest rate does seem higher than other banks. I would love it to be more competitive

Price
6/10
Customer service
7/10
Convenience
9/10
Trust
8/10
Less
Liza, New South Wales, reviewed 22 days ago
Commonwealth Bank Personal Loan
Overall 4/10
Beware: They sold me Junk Insurance

Took out a $10,000 personal loan for a medical procedure. I’ve been a lifelong customer of Commonwealth Bank and thought they’d offered me a good package as this is the first and only loan I’ve had. Was unknowingly sold junk insurance and am now part of a class-action suit for a refund of the insurance and interest they charged. Here’s hoping they do the right thing!

Read full review

Took out a $10,000 personal loan for a medical procedure. I’ve been a lifelong customer of Commonwealth Bank and thought they’d offered me a good package as this is the first and only loan I’ve had. Was unknowingly sold junk insurance and am now part of a class-action suit for a refund of the insurance and interest they charged. Here’s hoping they do the right thing!

Price
4/10
Features
3/10
Customer service
7/10
Convenience
7/10
Trust
2/10
Less
Stephanie, New South Wales, reviewed 27 days ago
Bendigo Bank Unsecured Personal Loan
Overall 10/10
The bank who cares

They are very transparent with their fee's and we were able to get an unsecured loan to pay off our credit card and pay for a trip to England when my father died. We only had one person who was on a permanent wage and don't live in a home we own. No mortgage and we've managed to have it almost paid off in 4 years

Read full review

They are very transparent with their fee's and we were able to get an unsecured loan to pay off our credit card and pay for a trip to England when my father died. We only had one person who was on a permanent wage and don't live in a home we own. No mortgage and we've managed to have it almost paid off in 4 years

Price
10/10
Features
10/10
Customer service
10/10
Convenience
10/10
Trust
10/10
Less
Michelle, New South Wales, reviewed about 2 months ago

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