The pro’s and con’s of having a fixed rate personal loan

Published on November 30th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors

Fact checked

At Savvy, we are committed to providing accurate information. Our content undergoes a rigorous process of fact-checking before it is published. Learn more about our editorial policy.

At Savvy, our mission is to empower you to make informed financial choices. While we maintain stringent editorial standards, this article may include mentions of products offered by our partners. Here’s how we generate income.

If you have been in search of a personal loan that has the right fit for you, you might have come across the words ‘fixed term’ or ‘fixed variable’ loan which is the same thing, but you want to understand how this will affect you. With most things, there are pro’s and con’s and we have broken it down into something that will help you make an informed decision.

What is it?

fixed personal loan is basically loan charges that have a fixed interest rate, which means that your repayments will not change for the period of the loan. This is usually a term that works for someone who wants stability in terms of knowing how much you will be expected to pay each month. If you are a budget strict person, it will work perfectly for you because you can factor this into your budget knowing that it will never change.

The advantages of having a fixed personal loan

The obvious drawcard is that the payments towards your loan will remain the same, helping you know just how much you need to put aside to pay it off. This also means that when the market interest rate rises and falls your loan will not be affected.

Disadvantage of having a fixed personal loan

When choosing a fixed rate personal loan, you will find that the disadvantage to this is that the fixed interest rates may be higher than the variable rates in the long-term. Another disadvantage could be the fact that you could be paying more than a variable rate loan.

There is also a limit in terms of how much you can pay as early repayment. It’s advisable that you check whether there will be additional fees you will have to pay when making early repayments. Since it is a fixed rate, you won’t benefit from any decreases in interest rates.

The option of going secured or unsecured

This will be determined by your particular needs and circumstances as to whether you would want to go with a secured fixed rate or an unsecured fixed rate. If you need a second opinion, you can always speak to a financial advisor who will help you make an informed decision about your situation.

Things to keep in the back of your mind

It’s always important that you compare and research whether a fixed rate loan or any loan for that matter suits the situation that you are in. What worked for John Doe might not work for you. Also consider:

  • Early exiting of the loan – Exit fees on fixed rate loans can be high since they leave your lender at a disadvantage. The lender will expect you to repay them through ‘break costs’ which consider the time and amount left on the loan. You can ask your lender to show you the ‘break costs’ to see how much you will be paying.
  • Fees and charges – Always look at the terms and conditions in terms of fees and charges before signing up for a loan. Before you sign up for a loan it would be best to compare and see what other offers are out there.

Did you find this page helpful?

Thanks for your feedback!

This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for personal loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

In this article

Share this article

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on pinterest

Looking for a personal loan?

Compare personal loan lenders with Savvy and get approved today!

* Terms and conditions and lending criteria apply.

Smart money saving tips

Subscribe to our newsletter.

By subscribing you agree to our privacy policy

Compare personal loans today

We’re here to help you find the most affordable options, so there’s no better way to compare personal loans and rates than right here, all in one place.

Related articles

We'd love to chat, how can we help?

By clicking "Submit", you agree to be contacted by a Savvy broker and to receive communications from Savvy which you can unsubscribe from at any time. Read our Privacy Policy.