Fixed Rate Personal Loans

Whether you’re worried about interest rates increasing, or just want certainty about your repayments, a fixed rate personal loan could be the right choice for you.

There are a lot of uncertainties when taking out a loan. But when you choose a fixed rate personal loan, there’s a few things you can count on. Here we explain what a fixed rate personal loan is and when you might need one.

What is a fixed rate personal loan

As the name suggests, a fixed rate personal loan has a set interest rate. This means that the interest rate does not change. Even if the lender’s interest rates move (increase or decrease), the loan’s rate won’t change.

It also means that your payments will stay the same throughout the life of the loan.

Why would I choose a fixed rate personal loan?

A fixed rate personal loan is a great choice if you want to know exactly what your repayments will be. As payments are set, there are no surprises, and it is much easier to budget.

A fixed rate personal loan also protects you from market movements. It could even save you money if rates go up. As such, if it looks like interest rates might increase, a fixed rate is probably the best choice.

When would a fixed rate personal loan not be suitable?

The main drawback of most fixed rate personal loans is that you cannot make extra repayments. At least not without incurring a fee. So, if you want to pay off your loan quicker, fixing your rate may not be right for you.

That being said, some fixed rate loans do provide payment flexibility. There are even some that allow you to redraw once you’ve made extra repayments. You just need to check the fine print to make sure the loan you choose has the features you want.

A fixed rate personal loan could also end up costing you more if interest rates fall. As such, it’s worth checking expected market movements over the life of your loan before locking in your rate.

Are there different types of fixed rate personal loans?

There are two main types of fixed rate personal loan – secured and unsecured.

A secured personal loan requires you to put up an asset (e.g. your car) as ‘insurance’. Your lender can then repossess that asset and sell it if you fail to make your repayments. Secured loans are usually easier to get because there is less risk for the lender.

An unsecured loan does not provide the lender with the same level of security. As a result, they can be harder to get and usually require a good credit history. They are generally more expensive too, with higher fees and interest rates.

Each lender will also have their own requirements, eligibility criteria, and fee structures. As such, you should always check the terms and conditions and make sure you understand what you’re signing up for.

What do I need to be eligible for a fixed rate personal loan?

Exact eligibility requirements will vary from lender to lender. However, generally speaking, you will need to be:

  • at least 18 years old
  • an Australian citizen or permanent resident
  • employed or receiving some form of income

You will also need to pass the lender’s credit worthiness checks. Generally this means you will need to have:

  • proof of your Australian residential address
  • a good credit score (usually above 500)
  • bank statements that show you have good financial habits (e.g. no overdraws, regularly putting money into savings, etc.)
  • evidence of your employment and regular income
  • evidence that you will be able to afford the repayments

The pros and cons of a fixed rate personal loan

As with all loan types, fixed rate personal loans have their good points and their bad points

The Good The Bad
Your interest rate will stay the same, usually for the life of the loan Generally, you cannot make extra repayments without incurring a fee
Your repayments will stay the same, making it easier to budget Most lenders will charge a break fee If you want to refinance or pay your loan off early
If interest rates go up during the life of your loan, you will save money If interest rates go down during the life of your loan, you will miss out on the saving
Some lenders offer payment flexibility and even a redraw function Having additional functions (like early repayment and redrawing) usually attract higher fees and interest rates