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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.
When comparing products, how do you find the cheapest personal loans out there? It’s worth bearing in mind that the provider with the cheapest personal loans isn’t necessarily the one offering the lowest interest rates. Because personal loans involve smaller amounts repaid over a shorter time period than a home loan, fees can have a larger impact on the overall cost. For example, a product with a low interest rate but which charges upfront and monthly fees may end up being more expensive than a loan with a slightly higher interest rate and no fees. Loan features can also boost the value you’re getting overall. So, the cheapest personal loans on offer for your situation may ultimately be the ones offering the best combinations of interest rate, fees and features that allow you to repay the loan early without penalty.
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).
What is an Account-keeping fee or ongoing fee?
Account-keeping fee or ongoing fee is 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.
What is an Advertised rate?
An Advertised rate is the interest rate advertised by institutions, not including fees, discounts, and special offers.
What is Bankruptcy?
Bankruptcy 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.
What is a Cash advance?
A Cash advance is when you withdraw cash from a line of credit such as a personal loan. Usually incurs additional fees or a higher interest rate.
What is a Comparison rate?
A Comparison rate is 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.
What is Consumption loan debt?
Consumption loan debt is 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.
What is a Credit report or credit history?
A Credit report or credit history is 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.
What is a Credit score or credit rating?
A Credit score or credit rating is 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.
What is Debt consolidation or a consolidation loan?
Debt consolidation or a consolidation loan is 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.
What does it mean to Default?
Defaulting is 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.
What is a 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.
What is a Fixed interest rate?
A fixed interest rate remains the same for the entire duration of the loan.
What is a Loan term?
A Loan term is 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.
What is a Redraw?
A Redraw is 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.
What is a Secured loan?
A Secured loan is 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).
What is a Unsecured loan?
An Unsecured loan is a loan that is obtained without security (collateral).
What is a Variable interest rate?
A variable interest rate is a rate that 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 of us
Community First Credit Union
Easy Street Financial Services
Endeavour Mutual Bank
G&C Mutual Bank
Illawarra Credit Union
Macquarie Credit Union
Northern Inland Credit Union
Queensland Country Bank
Regional Australia Bank
Service One Alliance Bank
Summerland Credit Union
Sydney Mutual Bank
Teachers Mutual Bank
Transport Mutual Credit Union
Compare personal loans based on your own requirements using the comparison selector tool at the top of this page.