Compare unsecured personal loans in Australia

What is an unsecured personal loan?

An unsecured personal loan allows you to borrow money without providing an asset as security. 

Unlike a secured loan, where the lender can claim your asset if you fail to repay the money, an unsecured loan isn’t backed by anything you own. If you default, your credit score will likely be damaged and the lender may be able to take legal action to recover its money.

Because unsecured loans represent a higher risk for the lender, they typically feature:

• Higher interest rates compared to secured options
• Stricter eligibility criteria, as lenders may look more closely at your finances to ensure you can manage the debt
• Lower borrowing limits compared to secured loans

How does an unsecured personal loan work?

Here’s how taking out an unsecured personal loan typically works:

• Loan term and repayments
  You pay back the amount you borrowed, plus interest and any fees, in weekly, fortnightly, or monthly repayments over a set term, typically between one and seven years. 
• Fixed or variable interest
  The interest rate you pay on the loan can be fixed or variable.
• • Fixed rate: Your interest rate and repayments stay the same for the life of the loan, providing budget certainty.
  • Variable rate: Your interest rate can change, meaning your repayments may rise or fall over time.
• Other fees and charges
  Along with interest, you may also pay fees, such as an application fee and ongoing monthly service charges.
• Additional features
  Some lenders may offer features like unlimited extra repayments or redraw facilities on personal loans. 

What can you use an unsecured personal loan for?

You can use an unsecured personal loan for any number of things, but they’re typically used for one-off costs, rather than to cover day-to-day spending.

For example, you may use an unsecured personal loan to:

• Pay for a wedding
• Take a holiday
• Renovate your home
• Consolidate your debt 
• Cover unexpected expenses
• Buying a car (although a secured car loan may offer a better rate, depending on the age of the vehicle)
• Paying for car repairs or restorations

What are the pros and cons of an unsecured personal loan?

Like all forms of credit, unsecured personal loans have both advantages and disadvantages. Weigh your options carefully to make an informed choice.

Pros

• You don’t have to put up an asset to secure the loan
• They can be used for a wide range of purchases
• They’re often more straightforward to apply for than a secured loan

Cons

• You may pay a higher interest rate than if you took out a secured personal loan
• You may not be able to borrow as much as you could with a secured option
• Taking on debt risks putting stress on your finances and you could fall behind on repayments, which could affect your credit score

How can I compare unsecured personal loans?

You can compare a wide range of unsecured personal loans using our comparison tables. Alternatively, give us details on your ideal loan, link your credit score, and we’ll help you find options you might be eligible for. 

When comparing unsecured loans, key questions to consider include:

• Is the interest rate fixed or variable? A fixed rate means your interest rate and repayments stay the same over the life of the loan while a variable rate means the interest rate can change and your repayments may go up or down.
• What is the comparison rate? The comparison rate on a personal loan takes into account the interest rate and most upfront and ongoing fees and charges to give you a better idea of the total cost of the loan each year.
• What are the fees? Look closely at the fees charged on a loan, as a competitive interest rate doesn’t mean much if the total cost of the loan ends up being higher. 
• What is the loan term? A longer term will typically mean lower repayments but you will usually pay more interest in total, all else being equal.
• What features are available? Some lenders offer loan features that may suit your needs and finances. For example, can you make extra repayments on the loan and is there a fee for doing so? Is there a redraw facility, letting you access extra repayments if you need to?

How much can I borrow with an unsecured personal loan?

The amount you can borrow with an unsecured loan depends on your financial position and your ability to repay the loan.

Unsecured loans generally have lower borrowing limits than secured loans because they’re riskier for a lender.

For this reason, lenders also tend to carry out a more thorough assessment of your finances, considering  your income, credit score, existing debts, number of dependents, and more to determine how much you can comfortably pay back.

How do I apply for an unsecured personal loan?

Once you decide on an unsecured personal loan product or lender, you can usually start your application online. Some lenders will also take applications over the phone or in-branch.

Before applying, check that you meet the basic eligibility criteria. This typically includes being an Australian resident and at least 18 years old

You’ll need to provide paperwork to prove you are who you say you are and your finances are how you describe them. This can include:

• Identification documents, such as your driver’s licence or passport
• Proof of income, such as bank statements, payslips, or tax returns
• Your employment details
• Information about any assets you own, such as a car or property
• Details of your existing debts
• The number of dependants you have and your general living expenses

Before you apply for a personal loan, read the loan documentation carefully. This can help you choose a product that best fits your requirements and financial situation.

Alternatives to an unsecured personal loan

Some other ways to cover the cost of a large expense might include:

• Using savings or waiting until you have saved up enough money
• Accessing cash by withdrawing extra repayments you have made on your home loan, if it has a redraw facility
• Applying for a no-interest loan through the No Interest Loan Scheme (NILS) (only available to eligible low income earners to pay for certain essential goods and services).
• For some expenses, you may consider using a credit card, but factor in the higher interest charges these usually demand.