Personal loans can be used to help pay for big expenses like buying a car, renovating your home or consolidating debt. By choosing a loan with a low interest rate, you can lower your repayments and reduce the amount you will have to pay in interest on top of the amount borrowed.
How can I get a low-interest personal loan?
There are a few different ways you may be able to get a lower interest rate on a personal loan:
- Consider a secured personal loan. With a secured personal loan, you need to provide the lender with an asset (such as a car) as security. If you don’t make the agreed repayments, the lender can then possess the asset and sell it to recover the cost of the loan. Because of this added level of protection for the lender, secured personal loans typically have lower interest rates than unsecured ones.
- Have a good credit score. Many lenders offer risk-based personal loans, where your interest rate will be higher if you are seen as a riskier borrower. Borrowers with ‘excellent credit’, on the other hand, are usually offered the lowest rates.
- Consider a loan guarantor. A loan guarantor is someone who guarantees the loan for you, such as a family member or friend. Guaranteeing the loan means agreeing to make the repayments if you cannot. According to ASIC’s Moneysmart, some lenders will offer you a lower interest rate if you have a loan guarantor. However, it’s important to be aware of the risks involved.
- Shop around. Another way to find a low-interest personal loan is to make sure you are comparing loans from a range of lenders.
Who offers low-interest personal loans?
Here’s a snapshot of the lowest-rate personal loans on Canstar’s database at the time of writing.
You can compare a wider range of personal loans using Canstar’s comparison tables and can filter the results by the lowest advertised rate. You can also tailor the results according to your preferred loan amount, loan duration and whether you want to provide security. Please note that the results do not take into account your credit history and other factors specific to your loan application, which may affect whether you are eligible for the loan or not and what interest rate might apply. Remember too that some of the loans shown may be limited to particular purposes, such as ‘green loans’ which are generally restricted to the purchase of certain environmentally-friendly products or home improvements.
Compare Unsecured Personal Loans with Canstar
The table below displays some the unsecured personal loan products on Canstar’s database for a three-year loan of $20,000 in NSW. The products are sorted by comparison rate (lowest to highest), then by provider name (alphabetically). Use Canstar’s Personal Loans comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals. Read the Comparison Rate Warning.
Compare Secured Personal Loans with Canstar
The table below displays some the secured personal loan products on Canstar’s database for a three-year loan of $20,000 in NSW. The products are sorted by comparison rate (lowest to highest), then by provider name (alphabetically). Use Canstar’s Personal Loans comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals. Read the Comparison Rate Warning.
How can I compare low-interest personal loans?
When choosing a personal loan, a low interest rate is just one factor to look for. Other factors to consider include:
- Is the interest rate fixed or variable? With a fixed rate, the interest rate and your repayments will stay the same during the loan. With a variable rate, the interest rate can go up or down during the loan, and your repayments can also vary as a result.
- What is the comparison rate? The comparison rate on a home loan or personal loan takes into account both the interest rate and most upfront and ongoing fees and charges. It’s designed to give you a better idea of the total cost of the loan per year.
- What are the fees? It’s also important to look at the specific fees charged on the loan. For example, personal loan fees can include an establishment fee, monthly service fees, missed payment fees, extra repayment fees and early repayment fees.
- What is the loan duration? By choosing a loan with a longer duration, you will typically get lower repayments each week, fortnight or month. But, you will usually pay more interest in total.
- What features are available? For example, can you make extra repayments on the loan and is there a fee for doing so? Is there a redraw facility so you can access extra repayments if you need to?
You can also view Canstar’s expert Personal and Car Loan Star Ratings, which compare loans based on cost and features.
How much can I borrow with a low-interest personal loan?
The amount you can borrow will depend on the provider, the type of loan you take out (for example, whether it is secured or unsecured) and your financial situation.
To work out how much you can borrow, providers will typically consider your income, expenses, personal details (including if you have any dependents) and any other financial commitments you have (such as other loans or credit cards) as part of assessing your loan application.
Can I get a low-interest loan if I have bad credit?
If you have bad credit, you may find it harder to get approved for a personal loan in general. You may find it particularly difficult to get approved for a loan with a major bank or other large financial institution, as they often require applicants to have a good credit score.
If you are applying for a risk-based personal loan, you will typically be charged a higher interest rate if you have a bad credit score. If you don’t need a loan urgently, it might be wise to improve your credit score before you apply for one. There are various steps you can take to help improve your score over time. You can also check your credit score for free with Canstar. If you need help managing your debts, you may want to speak to a free financial counsellor. You can call the National Debt Helpline on 1800 007 007.
Can I get a 0% interest personal loan?
Lenders do not generally offer personal loans with a 0% interest rate. However, there are some community organisations that offer no interest loans (NILS) to people who are on a low income. These loans are an initiative of Good Shepherd and can only be used to purchase essential goods and services such as fridges, washing machines, car repairs and medical procedures.
Good Shepherd is also offering Household Relief Loans Without Interest for people who have been financially impacted by COVID-19. These loans can help with rent and utility bills.
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