The features and benefits of personal loans
By comparing a wide range of options through Savvy, you can consider loans with competitive interest rates tailored to your specific profile.
You’ll be able to apply for the maximum amount you can afford to borrow up to $75,000, with the minimum loans available sitting at just $2,000.
As part of your loan agreement, you get to decide the time over which to repay your loan, with terms available as short as one year and as long as seven.
The total interest you pay on your loan is able to be cut down significantly if you pay above the minimum required amount in each instalment.
There won’t be any requirement for you to pay any interest, fees or a lump sum upfront; your payments begin the month (or week or fortnight) after you sign your loan agreement.
Types of personal loan
With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.
Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.
Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.
Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.
If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can not only make them more convenient to manage but also potentially save you money overall.
Looking to take off on a holiday with your family but want to pay it off at your own speed? Travelling can be expensive, so you can distribute the cost of your next trip over a period you’re more comfortable with by taking out a personal loan to pay for it.
There are so many costs that go into making your dream wedding a reality, from venue hire to catering to dresses and suits and so much more. By taking out a personal loan, you can start planning the big day you want, even if you can’t pay for it upfront.
Home improvements are desirable for a range of homeowners to help keep their living space fresh and interesting, not to mention increase its value. You can get past the financial hit of renovations with a personal loan paid in instalments.
Personal loans aren’t limited to PAYG employees, though. If you’re running your own business, you can still be approved for financing by submitting tax returns and other alternative documents instead of payslips and utilise your funds however you wish.
There’s a variety of expenses which come with being a student, ranging from the cost of your courses, textbooks and computer to your accommodation. Taking out a personal loan can make these costs more manageable by spacing them out.
Some lenders offer green personal loans, which are designed to be used for energy-efficient appliances and products such as solar panel and air conditioning installation in your home. You can qualify for lower interest rates and fees with this loan.
Why compare personal loans through Savvy?
The factors which affect your interest rate
Your credit rating
Perhaps the greatest impact on your interest rate is your credit score. This is a number that everyone has which represents their record when it comes to servicing debt, such as repaying loans and bills on time and in full.
The better and more reliable you are at doing so, the higher your credit score will be and the lower your interest rate as a result.
Personal loan interest rates explained
What different types of interest rate can I choose from?
When it comes to personal loans, it’s important to be able to distinguish between the two types of interest rate which can be charged on your personal loan: fixed and variable interest.
Fixed interest rates
The most common type of interest occurring on personal finance, fixed interest is when your lender locks in your rate from the outset, preventing it from changing across your loan term. Many borrowers prefer the stability which fixed rates bring, as loans with consistent repayments are much better when it comes to budgeting around them into the future. On top of this, you won’t have to worry about any unfavourable interest rate changes during your term, meaning the cost of your loan can’t increase. However, in equal measure, you won’t be able to take advantage of rate decreases, which could save a significant amount.
Variable interest rates
Variable interest, unlike its fixed counterpart, remains open to market movement across your loan term. Perhaps the greatest benefit of this is that if you take out your loan at a time when rates across the board are expected to fall, you could end up paying much less for your loan than if it had been fixed at its initial rate. It’s important to note, though, that these rates could end up costing you more if the reverse happens and your lender increases their interest rate. These rates also don’t offer the same stability as fixed interest.
How do lenders calculate interest?
Interest is charged on personal loans daily and added to each instalment, whether you choose to pay weekly, monthly or fortnightly. This means that the percentage rate on your loan is multiplied by your outstanding balance each day. Because of this, you may find you pay slightly less interest by making your repayments more often, such as weekly or fortnightly instead of monthly, as your outstanding principal has the opportunity to decrease more frequently. If you paid monthly, your interest would be calculated on your base $30,000 loan amount for the full 30 days or so, but fortnightly repayments would mean this would reduce after 14 days.
Lenders decide on the interest rates for their personal finance products, as well as all other loans, based in large part on the Reserve Bank of Australia (RBA) cash rate. This national rate can rise and fall in line with many different variables, with the most significant being the nation’s economy and inflation. If the RBA’s cash rate rises or falls, lenders can choose whether to pass these increases or decreases onto their customers.
How else should I compare personal loans?
Although interest is one of the most important ways to compare different personal loan offers, there are many other ways you can go about selecting which is the best for you. Fortunately, you can do this right here with Savvy, as we’re partnered with a range of reputable lenders from around Australia to deliver you the highest-quality comparisons across a variety of key areas. The other primary factors to consider when comparing loans are:
The other main cost to keep an eye on when comparing loans is their fees. There are several charges which can apply to personal loans, but many lenders don’t charge some or most of these on their offers. Establishment fees can cost up to around $600, but you can access loans without any charge for setting up your agreement. This is also the case for ongoing service fees, which may be charged up to $10 in some cases but are often not charged. Late payment fees will be charged in all cases, though, which may set you back up to $35 or more for each missed instalment.
Of course, it’s crucial above almost all else that your lender can offer you the amount you need to borrow to cover whatever expenses need covering. This is especially the case for those looking to take out a loan on the smaller or larger ends of the spectrum, as financiers’ minimum and maximum amounts can vary. While many lenders cap their unsecured loans at $50,000, there are those in the market right now who can offer as much as $75,000 without any asset collateral. Similarly, there are lenders who can approve applications for as little as $2,000 but others who may enforce a minimum of $5,000.
On top of this, you should always make sure you can space out your repayments over a period which suits your needs. This can vary from one to seven years generally, but different lenders will offer different deals. For instance, there are some lenders whose minimum repayment term sits between 18 months and three years, while there are many others who only allow borrowers to repay their debts over five-year terms. You should approach the comparison process with a clear idea of what time you need to cover your debts.
You should always have the ability to pay as often and as freely as you like without the threat of a hefty penalty hanging over your head. These days, most personal loan financiers (particularly private online lenders) won’t charge any additional or early repayment fees, but it’s always important to establish whether you have the freedom to do so from the outset of your loan. Making extra contributions will reduce the time it takes to pay off your debt and, crucially, the amount of interest you’ll be required to pay overall.
Finally, your loan may come with other handy features which can benefit you during your repayment term. A common one is the ability to set your repayment schedule to either weekly, fortnightly or monthly instalments (which not all lenders offer). Another may be a redraw facility, which enables borrowers to access additional payments they’ve made across their loan and withdraw for any purpose, which can serve as a more convenient alternative to seeking out another loan but can also end up costing you more in interest and fees in the long run.
Common questions about personal loan interest rates
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.