Interest only home loan rates

The table below displays a selection of home loans from our Online Partners where borrowers can make interest-only repayments.

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Pacific Mortgage Group Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 364320.
Pacific Mortgage Group Home Loan | Variable
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5.59%
Variable
5.59%
$2,329
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 364320. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 364320. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Greater Bank Great Rate Home Loan | Special | Variable
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Fees & charges apply. Australian Credit Licence 237476.
Greater Bank Great Rate Home Loan | Special | Variable
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5.59%
Variable
5.60%
$2,329
Interest Only
Link Not Supplied
Cashback
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 237476. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 237476. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Newcastle Permanent Real Deal | Special | Variable
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Fees & charges apply. Australian Credit Licence 238273.
Newcastle Permanent Real Deal | Special | Variable
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5.69%
Variable
5.61%
$2,371
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238273. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238273. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Regional Australia Bank Mortgage Non Offset Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 241167.
Regional Australia Bank Mortgage Non Offset Home Loan | Variable
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5.84%
Variable
5.62%
$2,433
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 241167. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 241167. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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HSBC Home Value | Variable
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Fees & charges apply. Australian Credit Licence 232595.
HSBC Home Value | Variable
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5.94%
Variable
5.69%
$2,475
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 232595. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 232595. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Bank Australia Limited trading as Qudos Bank No Frills Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 238431.
Bank Australia Limited trading as Qudos Bank No Frills Home Loan | Variable
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5.94%
Variable
5.71%
$2,475
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238431. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238431. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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IMB Budget Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 237391.
IMB Budget Home Loan | Variable
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5.84%
Variable
5.73%
$2,433
Interest Only
Link Not Supplied
Cashback
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 237391. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 237391. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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The Capricornian No Frills | Variable
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Fees & charges apply. Australian Credit Licence 246780.
The Capricornian No Frills | Variable
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5.69%
Variable
5.74%
$2,371
Interest Only
Link Not Supplied
Owner occupied
3% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 246780. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 246780. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Firefighters Mutual Bank Your Way Basic Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 238981.
Firefighters Mutual Bank Your Way Basic Home Loan | Variable
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5.84%
Variable
5.75%
$2,433
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Health Professionals Bank Your Way Basic Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 238981.
Health Professionals Bank Your Way Basic Home Loan | Variable
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5.84%
Variable
5.75%
$2,433
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Teachers Mutual Bank Your Way Basic Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 238981.
Teachers Mutual Bank Your Way Basic Home Loan | Variable
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5.84%
Variable
5.75%
$2,433
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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UniBank Your Way Basic Home Loan | Variable
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Tooltip icon
Fees & charges apply. Australian Credit Licence 238981.
UniBank Your Way Basic Home Loan | Variable
star filled star filled star filled star filled empty star
Tooltip icon
5.84%
Variable
5.75%
$2,433
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238981. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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The Capricornian Offset | Variable
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Fees & charges apply. Australian Credit Licence 246780.
The Capricornian Offset | Variable
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5.79%
Variable
5.80%
$2,413
Interest Only
Link Not Supplied
Owner occupied
3% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 246780. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 246780. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Easy Street Fin Services Street Smart | Variable
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Fees & charges apply. Australian Credit Licence 231204.
Easy Street Fin Services Street Smart | Variable
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6.04%
Variable
5.82%
$2,517
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 231204. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 231204. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Hume Bank Liteblue | Variable
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Fees & charges apply. Australian Credit Licence 244248.
Hume Bank Liteblue | Variable
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6.09%
Variable
5.82%
$2,537
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 244248. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 244248. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Queensland Country Bank Ultimate Home Loan Package | Special | Variable
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Fees & charges apply. Australian Credit Licence 244533.
Queensland Country Bank Ultimate Home Loan Package | Special | Variable
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5.49%
Variable
5.83%
$2,288
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 244533. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 244533. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
promoted
Regional Australia Bank Mortgage Offset Home Loan | Variable
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Tooltip icon
Fees & charges apply. Australian Credit Licence 241167.
Regional Australia Bank Mortgage Offset Home Loan | Variable
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Tooltip icon
6.05%
Variable
5.83%
$2,521
Interest Only
Link Not Supplied
Owner occupied
20% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 241167. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 241167. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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G&C Mutual Bank Advantage Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 238311.
G&C Mutual Bank Advantage Home Loan | Variable
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5.79%
Variable
5.84%
$2,413
Interest Only
Link Not Supplied
Owner occupied
5% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238311. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238311. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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Unity Bank Advantage Home Loan | Variable
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Fees & charges apply. Australian Credit Licence 238311.
Unity Bank Advantage Home Loan | Variable
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5.79%
Variable
5.84%
$2,413
Interest Only
Link Not Supplied
Owner occupied
5% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238311. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238311. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
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G&C Mutual Bank Advantage Home Loan Offset | Variable
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Tooltip icon
Fees & charges apply. Australian Credit Licence 238311.
G&C Mutual Bank Advantage Home Loan Offset | Variable
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5.89%
Variable
5.94%
$2,454
Interest Only
Link Not Supplied
Owner occupied
5% min deposit
Redraw facility
Fees & charges apply. Australian Credit Licence 238311. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR
Link Not Supplied
Fees & charges apply. Australian Credit Licence 238311. Star Rating for a $500k owner occupier variable rate IO loan at 80% LVR

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The initial results in the table above are sorted by Star Rating (High-Low) , then Comparison rate^ p.a. (Low-High) , then Provider Name (Alphabetical) . Additional filters may have been applied, which impact the results displayed in the table - filters can be applied or removed at any time.

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Fees & charges apply. Australian Credit Licence 237391.
Interest rate p.a.
Comparison rate^ p.a.
Monthly repayment
5.54%
Variable
5.57%
$2,852
Principal & Interest
IMB Bank Budget Home Loan
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Fees & charges apply. Australian Credit Licence 237391. See Terms & Conditions. ^ Comparison Rate Warning. Star Rating for a $500k owner occupier variable rate P+I loan at 80% LVR
Fees & charges apply. Australian Credit Licence 237391. See Terms & Conditions. ^ Comparison Rate Warning. Star Rating for a $500k owner occupier variable rate P+I loan at 80% LVR

 

What is an interest-only home loan?

An interest-only (IO) home loan is a lending arrangement where you only repay the interest on the amount you have borrowed for a set period of time. You don’t have to repay the principal (the loan amount) during that period, like you would with a principal and interest (P&I) loan.

The maximum interest-only loan period is typically five years for owner-occupiers, but may be longer for investment loans. After this period, the loan reverts to principal and interest repayments.

How does an interest-only home loan work?

With an interest-only home loan, your repayments are lower than they would be on a principal and interest loan during the interest-only period, but would go up once you start paying off the principal component of the loan.

It’s common for the interest-only period to come in one chunk at the start of the loan term, but some lenders may offer borrowers the ability to switch between interest-only and principal and interest repayments throughout the life of the loan, up to the maximum total interest-only period.

In most other respects, interest-only loans work in much the same way as other kinds of home loan, with regular repayments, fixed and variable interest rate options and a loan term of up to 30 years typically (including the interest-only period).

Construction loans and bridging loans are other types of property finance that are commonly based on interest-only repayments for a part of the term.

Who uses interest-only home loans?

Interest-only loans tend to be particularly appealing to property investors and are generally more commonly available to these borrowers. This is because keeping non-interest costs low is often a particular priority for investors to enable them to free up cash for other investments.

But interest-only home loans are also available to owner-occupiers and may be appealing to people who need to free up cash in the early part of their loan term. Moneysmart explains that this can enable people to save some money to pay off more expensive debts, such as a credit card balance.

Are interest-only home loans more expensive than principal and interest loans?

Generally speaking, interest-only home loans work out to be more expensive than principal and interest loans in the long run. This is due to the higher interest rates charged on average on interest-only loans, and the fact that you are being charged interest on the whole loan amount during the interest-only period. In contrast, with a principal and interest loan you would start paying down the balance gradually from the start and would therefore be charged interest on a lower amount as time goes on.

Frequently Asked Questions about Interest-Only Home Loans

This will depend on your circumstances. In some cases, an interest-only home loan could help by freeing up cash flow for borrowers, such as investors, but they would need to be mindful of the increased costs and potential risks.

Individual lenders will assess who is eligible for their interest-only home loans, but generally would apply similar criteria to their other loans. Because of the potential for greater risk with this kind of loan, lenders may apply stricter checks on borrowers.

Yes, some interest-only home loans come with a fixed rate of interest. With this kind of loan, your interest rate would stay the same during the fixed rate period. If the fixed rate period ends while the interest-only period is still going, your interest rate and repayments could change.

It’s generally possible to sell your home during your home loan’s interest-only period, although it may be challenging if your equity in the home is low. If selling your home involves you using the sale funds to pay out the home loan, you may incur break costs, particularly on fixed rate loans.

Depending on the loan terms and conditions, it may be possible to make extra repayments on your interest-only home loan. This option is generally more common on variable rate home loans than fixed loans.

If you have a variable rate home loan, your rate may change, even during the interest-only period. If your interest rate went up, your regular repayments would go up too and vice versa.

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Alasdair Duncan, Content Editor

Alasdair Duncan
Alasdair Duncan is Canstar's Content Editor, specialising in home loans, property and lifestyle topics. He has written more than 500 articles for Canstar and his work is widely referenced by other publishers and media outlets, including Yahoo FinanceThe New DailyThe Motley Fool and Sky News. He has featured as a guest author for property website homely.com.au. In his more than 15 years working in the media, Alasdair has written for a broad range of publications. Before joining Canstar, he was a News Editor at Pedestrian.TV, part of Australia’s leading youth media group. His work has also appeared on ABC News, Junkee, Rolling Stone, Kotaku, the Sydney Star Observer and The Brag. He has a Bachelor of Laws (Honours) and a Bachelor of Arts with a major in Journalism from the University of Queensland, and has completed a RG146 compliance training course. When he is not writing about finance for Canstar, Alasdair can probably be found at the beach with his two dogs or listening to podcasts about pop music. You can follow Alasdair on LinkedIn.

Joshua Sale, GM, Research

Joshua Sale
Joshua Sale is responsible for developing the methodology and delivering Canstar’s flagship Star Ratings, as part of Canstar’s Research Team. With tertiary qualifications in economics and finance, he enjoys helping Australians find more suitable financial products by transforming complex calculations into a consumer-friendly Star Rating that explains the values and benefits of different financial products. As one of Canstar’s company spokespeople, Joshua is confident participating in print, radio and broadcast journalism interviews. He has participated in interviews with the Australian Financial Review, news.com.au and Money Magazine, along with other leading media outlets, discussing topics such as home loan equity, banking incentive schemes, digital wallets and wider finance trends. You can follow Joshua on LinkedIn. Have a media enquiry, and interested in featuring Joshua as a financial expert and commentator? Contact Canstar’s Media Team today.

Important information

For those that love the detail

This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.

Canstar may earn a fee from its Online Partners for referrals from its website tables, and from sponsorship or promotion of certain products. Fees payable by product providers for referrals and sponsorship or promotion may vary between providers, website position, and revenue model. Sponsorship/promotion fees may be higher than referral fees. If a product is sponsored or promoted, it’s an ad and it is clearly marked as such. An ad might appear in different places on our website, such as in comparison tables and articles. Ads may be displayed in a fixed position in a table, regardless of the product's rating, price or other attributes. The location of an ad doesn’t indicate any ranking or rating by Canstar. Payment of fees for ads does not influence our Star Ratings. See How We Get Paid to find out more. Payment of fees for ads does not influence our Star Ratings or Awards.

Home loan Star Ratings are updated daily. During periods of significant market fluctuations, such as adjustments to the reserve bank's cash rate, star rating updates will be paused for variable home loans until the market has stabilised. However, advertised interest rates of products will continue to be updated as advised by lenders. The results don’t include every provider in the market and we may not compare all features relevant to you. Current rates and fees are displayed and may be different to what was rated. You can find a description of the initial sort order below the table. You can use the sort buttons at the top of each column to re-order the display. Learn more about our Home Loans Star Rating Methodology. The rating shown is only one factor to take into account when considering products. The table defaults to display only home loans available to somebody borrowing up to 80% of the property value, but you can use the filters to change this. Similar products might have different features and fees depending on the amount you borrow. Contact the lender for details.

The products and Star Ratings in the table might not match your exact inputs in the selector. Sometimes the methodology uses profiles with categories or bands (e.g. income, loan amount or monthly spend), but sometimes a single methodology, without any categories or bands, is applied.  The results will show the products that most closely match your selection, based on our profiles. If you are unsure about any terms used in the comparison table please refer to the glossary.

What is a Target Market Determination?

A Target Market Determination (‘TMD’) is a document that explains which people particular financial products may be suitable for (the target market) and sets out any conditions around how financial products can be distributed to consumers.

Why do product issuers provide Target Market Determinations?

From 5 October 2021, TMDs are compulsory for most financial products.

Issuers and distributors of financial products must take reasonable steps that are likely to result in financial products reaching consumers in the target market defined by the product issuer.

We recommend that you consider the TMD before making a purchase decision. Contact the product issuer directly for a copy of the TMD.

Any advice on this page is general and has not taken into account your objectives, financial situation or needs. Consider whether this general financial advice is right for your personal circumstances. Canstar provides information about credit products. We’re not suggesting or recommending a particular credit product for you. If you decide to apply for a loan, you will deal directly with the provider, not with Canstar. Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. It’s important you check rates and product information directly with the provider. For more information, read our Detailed Disclosure. ^Read the Comparison Rate Warning.

Canstar is not providing a recommendation for your individual circumstances. We cannot and do not recommend that any particular product is suitable for you. 

We provide links to our Online Partners. These are brands that may pay Canstar a fee for referring you. Our tables default to display only our Online Partners’ products initially, you can adjust the Online Partner Filter to see all of the products available for comparison on Canstar’s website. We provide these links so that you can click through to the product provider’s website to get more information. The provision of these links does not constitute a recommendation by Canstar.

Before you elect to terminate or modify existing lending arrangements, we recommend you consider (i) your personal circumstances, and (ii) any associated fees, exit costs and application costs that may be applicable as well as the impact these changes could have on you. We suggest you consider seeking independent advice from a qualified adviser.

“Interest-only loan” generally means a loan where you will only pay interest during the interest-only term. That means you won’t be making payments which reduce debt during the interest-only term.