Fixed Rate Personal Loans

Considering a fixed rate personal loan? Find out what they are, how they work and compare the best offers with Savvy.

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
, updated on May 30th, 2024       

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If you’re looking to take out a personal loan, one of the options you’ll have is a fixed interest rate. But what does that mean? You can find out all about what they are and how they work, as well as compare a variety of competitive personal loan offers, right here with Savvy today. Get a free, no-obligation quote now!

What are fixed rate personal loans and how do they work?

A fixed rate personal loan is one of two types of interest rate which can apply to personal finance agreements, with the other being variable interest. Under this type of loan, the interest rate offered at the beginning of the loan is locked in and remains the same throughout your repayment period, regardless of the length.

This means the cost of your repayments will remain consistent, allowing you to budget around your repayments with more confidence and accuracy. You’ll know to set aside a certain amount each pay cycle to dedicate to your loan repayments.

Aside from this, though, the product itself works the same way as any other personal loan. You’ll still be able to borrow between $2,001 and $75,000 without the need to provide security (subject to your profile and lender) and space out your repayments over one to seven years on a weekly, fortnightly or monthly schedule.

How should I compare fixed rate personal loans?

There’s a variety of factors which should be considered when comparing the best fixed rate personal loan options for your needs, including:

  • Interest rate: of course, your interest rate will be a major factor in determining the cost of your loan. You should always aim to secure the lowest possible rate, as even small differences can result in hundreds of dollars in savings, if not more.
  • Loan amount: of course, you’ll need to ensure that you can actually borrow the amount you’re looking for as per your lender’s requirements. There’s no use entertaining offers from lenders who set their maximum loan amounts below what you need, for example.
  • Loan terms: similarly, you should always stick to lenders who can accommodate your preferences in terms of your repayment period, as it’s important to ensure you give yourself the best chance of paying off your loan without any issues. Not all lenders will offer terms as short as one or as long as seven years.
  • Fees: while there isn’t a long, detailed list of personal loan fees compared to other types of finance, it’s still important to consider establishment and ongoing charges when comparing. All personal loans will come with a comparison rate, which combines any establishment and ongoing fees with your interest into a single rate.
  • Repayment flexibility: some lenders will allow you to make additional repayments and pay off your debt ahead of schedule without charging a fee, which can save a considerable amount of money. However, this won’t always be the case, which is why it’s important to compare if you want to have this option available to you.
  • Eligibility: one of the most important things to be sure of prior to submitting your application is whether you’re eligible for the deal. Generally, the key points to meet are in relation to your age (18 or over), residency (citizen, permanent resident or eligible visa holder), employment and income (earning at lease $20,000 p.a. from stable sources, though some lenders will require more) and credit (no defaults, bankruptcy or court judgments).

What are the pros and cons of fixed rate personal loans?

The key pros and cons of fixing your interest rate on a personal loan are as follows:

Pros:

  1. Better for budgeting: because your rate is set in stone, you’ll know exactly how much is going towards your loan payments each week, fortnight or month.
  2. Protection against rate increases: if you’re taking out your loan at a time when rates are rising, you won’t have to worry about your loan increasing in cost.
  3. Wide range of options available: when comparing personal loan offers, you’ll find a wide and diverse variety of options to choose from.

Cons:

  1. Less flexibility: as mentioned, some lenders will charge early repayment fees on fixed rate personal loans, which could block you from saving more money.
  2. No benefit from rate drops: while you’re protected if rates go up, you won’t be able to take advantage of any decreases in interest.
  3. May be higher if rates are expected to rise: if you’re borrowing at a time when interest is expected to rise, you may have to pay more to fix your rate.

How much will my fixed rate personal loan cost?

The cost of your personal loan will be determined by a variety of factors, including the following:

  • Interest: as mentioned, the higher your rate, the more you’ll have to pay overall.
  • Fees: the same applies to fees, so seeking out loans with low or no fees will help your hip pocket.
  • Loan amount: larger loan sums will attract more interest.
  • Loan term: the faster you repay your loan, the less interest you’ll be required to pay overall.
  • Whether you make early payments: making additional repayments above the minimum required amount will help you clear your debt sooner and save on you interest.

The following table demonstrates how much lower rates can save you in interest over the life of your loan:

Loan amount 7.50% p.a. 8.50% p.a. 10.00% p.a.
$20,000
$4,046
$4,620
$5,497
$30,000
$6,069
$6,930
$8,245
$50,000
$10,114
$11,550
$13,742

Calculations based on a loan repaid monthly over five years.

What can I use a personal loan for?

Unlike home or car loans, which are required to be used for the asset they’re purchasing, you can make use of your personal loan funds for a variety of different purposes. Some of the more common reasons people take out personal loans include:

  • Consolidating outstanding debts into one payment, especially those which come with varying schedules and high interest rates
  • Covering the cost of your dream wedding
  • Helping out with planning your next holiday, regardless of whether it’s a trip up the coast or an expansive overseas getaway
  • Giving you the funds you need to pay for any unexpected medical expenses, both for your family and your pets
  • Paying for home improvements and renovations around your property
  • Purchasing a vehicle which may not qualify for standard secured car finance, such as one which is older than 25 years

Types of personal loan

Why compare personal loans through Savvy?

The differences between fixed and variable interest rates

How to apply for a personal loan

Our Process

Complete the comparison process with Savvy

You can compare a wide range of fixed rate loan options with Savvy to help you pick the best one for your needs before diving into your application.

Fill out your lender’s form and submit documents

You’ll be able to apply via your lender’s site after clicking through from Savvy and supply any documents you might need alongside your application.

Receive approval and have your funds transferred

You’ll be notified of approval if your lender is happy with the application, with a loan contract to be signed and returned before your funds are transferred.

Common fixed rate personal loan questions answered

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
Can you refinance a fixed rate personal loan?

Yes – you can generally refinance your fixed rate loan to another one with the same lender or a new provider. However, because some fixed rate loans come with early repayment fees, you should determine whether these outweigh the benefit of refinancing, which may be done to access a better rate, shorten your term or for a range of other reasons.

What fees will I pay on my personal loan?

Personal loans usually come with a set of fees that you’ll be required to pay as part of your agreement. These include:

  • Establishment fee: up to $595
  • Ongoing fees: up to $10 per month
  • Late payment fees: from $15 to $35

 

It’s important to note that some lenders don’t charge either an establishment fee or monthly service fees (while some charge neither), so comparing lenders who offer low- or no-fee loans is a great way to help you save a meaningful amount in the long run.

How long can I take to repay my fixed rate personal loan?

Some lenders offer fixed rate personal loan terms of between one and five years, but there are many that offer up to seven years. It’s important you choose your loan term carefully. Make it too short and you may not be able to meet your repayments. Make it too long and you will end up paying more in interest.

I need more money – can I take out another personal loan?

Generally speaking, it’s best not to have multiple loans at the one time. As an alternative – and depending on your lender – you may be able to redraw from your current loan. However, you must be ahead on your repayments (i.e. made extra payments) for this to be an option.

You may also be able to apply for a ‘loan top up’. This is effectively an extension of your loan and, if approved, will increase the amount you owe. However, you need to be aware that this will be another credit application and could affect your credit history.

What is a line of credit fixed rate personal loan?

A line of credit fixed rate personal loan goes through the exact same approval process. Once approved for a certain amount you can then draw down funds as required. 

How much can I borrow with a fixed rate loan?

While the amount you can borrow on a personal loan can vary from as little as $2,001 to as much as $75,000, it’ll ultimately depend on a range of factors. These include:

  • Your income and employment/pay stability
  • Your expenses and other liabilities
  • Whether your loan is secured or unsecured
  • Your lender’s minimum and maximum loan amount
  • Your lender’s minimum and maximum loan term
How quickly can my personal loan be approved?

When you apply for a personal loan with Savvy, you can receive an outcome as soon as 60 seconds after you submit your fast application. From there, you can receive formal approval and funding as soon as within 24 hours.

Helpful personal loan guides

Still looking for the right personal loan?

Personal loans come in all shapes and sizes, so read more about the ways you can use them, as well as how they might work for you.