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Canstar News - June 7th
The call for the Small Amount Credit Contracts (SACC) came about following a 2016 review that found some lenders were granting loans to people who did not have capacity to repay. At the budget estimates hearing last…– Read more
A personal loan is a loan taken out for a personal reason such as big ticket household items including an overseas holiday, a car, furniture, elective surgery, or a wedding. Personal loans are also commonly used for consolidating your debts into one parcel of money to be paid off.
Part of the appeal of a personal loan is that they can be approved by financial institutions very quickly. Most financial institutions can approve or deny a personal loan in 1 – 3 banking days, and many lenders can even approve a personal loan immediately (Canstar, 2017).
There are two main types of personal loans:
A common type of secured personal loans is a car loan, which is secured by the car you are buying. Because car loans are such an important product for many Australians and they often have different terms and conditions to other personal loans, we compare car loans separately on our website.
One type of unsecured personal loan is the personal overdraft facility, which allows you to keep spending up to a credit limit after you have spent the full balance of your savings account or transaction account. Interest is charged on the balance of your overdraft. When the overdraft is in use, a monthly fee is usually charged to maintain the line of credit; but when the overdraft is not in the use, only the normal fees for your savings or debit account are charged.
Personal loans are not available for financing property (see home loans), business (see business loans), stock market investment (see margin loans), unpaid overdue bills and fines, or court-ordered damages payments.
Thankfully, CANSTAR can help you compare each of these features and more when you compare personal loans using our website.
Canstar compares personal loans using a unique, sophisticated star ratings methodology that looks at both price and features. The results are presented in our consumer-friendly 5-star concept, with a 5-star rating signifying that a product offers outstanding value.
Canstar also compares additional features for personal loans, including:
Read the full Personal Loans Star Ratings report for more information.
You can compare personal loan products based on your own requirements using the comparison selector tool at the top of this page.
Written by: TJ Ryan and Tim Smith
Please note that these are a general explanation of the meaning of terms used in relation to personal loans.
The wording of loan terms and conditions may use different phrases or terms, and you should read the terms and conditions of the relevant loan to understand the features and cost of that loan. You cannot rely on these terms to the part of any loan you may purchase.
Refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG).
Account-keeping fee or ongoing fee: A monthly account-keeping fee that is charged by the lender to help cover the administration cost of maintaining the line of credit. Alternatively, you may be charged an annual fee rather than an ongoing account-keeping fee.
Advertised rate: The interest rate advertised by institutions, not including fees, discounts, and special offers.
Bankruptcy: This is when someone’s debt problems become so serious that they are unable to pay their existing debts and bills. When this happens, they can apply to a court to be declared bankrupt, and any assets or savings they have can be used to pay off their debts. Normally after one year a person will be discharged from bankruptcy, but it will still have a negative impact on their credit rating and may stop them getting credit in the future.
Cash advance: Withdrawing cash from a line of credit such as a personal loan. Usually incurs additional fees or a higher interest rate.
Comparison rate: A rate that represents the total annual cost of the loan in a single figure, including the interest rate, payments, and most of the ongoing and upfront fees and charges. On the Canstar website, all comparison rates for personal loans are based on a $10,000 loan over 3 years.
Consumption loan debt: Debt for personal loans for things that are either fully used immediately or depreciate in value from the time they are bought, including holidays, hire purchase, cosmetic surgery, furniture, furnishings, and other goods and services.
Credit report or credit history: A report from a credit reporting agency that contains a history of your previous loan and bill payments. Banks, lenders, creditors and financial institutions use this report to determine how likely you are to repay a future debt and whether or not they should lend money to you. Find out what is included in your credit report here.
Credit score or credit rating: A numerical score that represents the credit-worthiness of an individual or corporation, based on their previous borrowing and repayment history. Find out how to check your credit score here.
Debt consolidation or consolidation loan: When you take out one loan to pay off multiple other debts (e.g. other loans or credit cards). This is often done to secure a lower interest rate, secure a fixed interest rate, or for the convenience of paying only one monthly repayment instead of monthly repayments on multiple loans and credit cards. Learn how to consolidate debt here.
Default: When a cardholder fails to fulfil their obligation to make the minimum required payment on their loan. Defaults are a serious black mark on your credit report and negatively affect your credit rating.
Drawdown: A drawdown is when a lender “draws down” the loan from their funds into your bank account, and you use the money. Interest typically starts being charged from the date your loan funds are drawn down into your bank account.
Fixed interest rate: A fixed interest rate remains the same for the entire duration of the loan.
Loan term: The term of the loan usually refers to the length of time the borrower has to repay the loan. This is different to the loan terms and conditions, which are a full list of the lender’s conditions in agreeing to offer a loan, including the interest rate, fees and charges, and the loan term.
Redraw: A loan feature where the borrower can withdraw funds they’ve already paid, if they have made additional repayments on top of the required minimum repayments. The redraw feature is not available on all loans.
Secured loan: A loan that is backed by ‘security’ (collateral) such as the property the business owns (commercially secured) or the home the business owner lives in (residentially secured).
Unsecured loan: A loan that is obtained without security (collateral).
Variable interest rate: A variable interest rate fluctuates over time based on the RBA cash rate and the lender’s business decisions.
At the time of writing, CANSTAR researches and rates the following providers of personal loans:
Arab Bank Australia
Australian Military Bank
Bank Australia (formerly bankmecu)
Bank of Melbourne
Bank of Us
Beyond Bank Australia
Big Sky Building Society
BOQ (Bank of Queensland)
Coastline Credit Union
Commonwealth Bank (CommBank)
Community First Credit Union
Easy Street Financial Services
FCCS Credit Union
First Option Credit Union
G&C Mutual Bank
Gateway Credit Union
Holiday Coast Credit Union
Horizon Credit Union
Illawarra Credit Union
Intech Credit Union
Latitude Financial Services
Macquarie Credit Union
ME Bank (ME)
My Credit Union
Northern Inland Credit Union
QBANK (formerly QPCU)
QT Mutual Bank
Queenslanders Credit Union
Regional Australia Bank
Endeavour Mutual Bank
Service One Alliance Bank
Southern Cross Credit Union
Summerland Credit Union
Teachers Mutual Bank
The Mac Credit Union
Transport Mutual Credit Union
Victoria Teachers Mutual Bank
Woolworths Employees Credit Union
Compare personal loans based on your own requirements using the comparison selector tool at the top of this page.