Compare personal loan rates and repayments

What is a personal loan?

A personal loan allows you to borrow a sum of money to pay for something significant, such as a car, holiday, home renovation or even consolidating debt. It’s often an amount between $2,000 and $100,000 that can be used as an upfront payment for such costs, which is why personal loans are quite useful. 

The loan must be paid back with interest over a fixed period of time, typically between one and seven years and in weekly, fortnightly or monthly instalments. As long as you stay on schedule, your repayments can be more straightforward to calculate and this can make the loan easier to plan for. 

However, personal loans also have the disadvantage of fees and interest rate charges. Given that the interest can be fixed or variable, that is locked for a term or moveable with the official cash rate, it’s worth noting the impact of interest on your total amount repaid.  

What can a personal loan be used for?

In Australia, personal loans can be used to help fund all sorts of things. However, they’re commonly taken out for big expenses and include the following kinds of loans:

• car loans
• holiday loans 
• home renovation loans
• debt consolidation loans.

Whether you’re needing to consolidate debt or finance a home improvement project, it’s often said that the best way to use a personal loan is to reach a specific financial goal. 

At the top of this page you can compare personal loans from the Mozo database. With some basic comparison you can get one step closer to finding a loan to suit your goals. 

How to compare personal loan interest rates

It’s time to compare personal loans based on the interest rate charged. There are two main options: fixed and variable. 

Fixed interest rate:

With a fixed rate loan your interest rate stays the same for the life of your loan, making it easier to budget for. This is an attractive option if you're worried about a rate hike down the track in a rocky financial climate.

Of course, there are a few cons, too. Fixed rates generally come with higher rates and fees, and typically don’t allow extra repayments or have redraw facilities. They also tend to come with break cost fees if you decide to pay your loan off early.

Variable interest rate:

On the other hand, your interest rate could change at any time with a variable rate loan. This could put you at risk if your provider decides to hike up its personal loan variable rates. 

However, the benefit of a variable rate loan is that they often come with lower interest rates and fees, and more flexible features.

How to compare personal loan types: secured vs unsecured

The rate of interest you pay on a personal loan is often determined by whether the loan is secured or unsecured. 

An unsecured loan means that you don’t have to provide any security for your loan, and often applies to a holiday or renovation loan. The interest on these loans can often be higher. 

By contrast, a secured personal loan is a loan guaranteed by an asset such as a car. This security usually means the lender can offer a lower rate on the loan. Let’s break these down a bit further. 

Secured personal loans

The benefit of a secured personal loan is that it generally comes with lower interest rate and fees because you use your own collateral against it.

This acts as a safety net for the lender because if you, as the borrower, fail to make your repayments, the lender can repossess your asset(s). This can be a car, house or another valuable item such as jewellery, for example.

Car loans are a common form of secured personal loans, as the car you’re paying off is typically used as security on the loan.

Unsecured personal loans

If you’d rather not put your car or home at risk, or you just don’t have any assets to secure your loan with, you could opt for an unsecured personal loan.

Unsecured loans don’t require you to guarantee the loan with any assets, but that means you’re usually left with higher interest rates and fees.

Debt consolidation

A personal loan can also help with troublesome debts. A debt consolidation loan lets you combine multiple debts (from multiple loans, stores or credit cards) into one loan.

This way, you’ll have just one regular repayment and interest rate to worry about instead of juggling multiple repayments, deadlines and amounts.

How to compare personal loan features

You’ve checked rates and you know the difference between a secured and unsecured loan, so it’s time to check for extra features. 

Here are some you might come across when comparing personal loans:

Extra repayments

You never know where you’ll be down the track financially. It’s good to have a personal loan with the ability to make extra repayments, which means if you suddenly find yourself flush with cash, you can pay off your loan quicker.

Redraw facility

Another handy feature is a redraw facility, as you never know when you’ll be hit with unexpected bills. A redraw facility allows you to dip into any extra loan repayments you’ve made and redraw the money. 

Flexible repayment frequency

Flexible repayment options allow you to tailor them to your regular pay schedule. For example, if your employer pays you fortnightly, you might opt for fortnightly loan repayments to match.

How much should I borrow with a personal loan?

Firstly, establish the overall cost of your item or project. Once you know the approximate amount, be it a $20,000 car, a $30,000 home reno or $5,000 debt consolidation, you can establish how much you would like to borrow.

Here are three easy steps to help:

1. Set a budget

While a lender may approve you for a large loan amount, it doesn’t mean you should take out that entire sum.

Mozo’s budget calculator can help you get a clearer picture of your finances.

2. Work out your regular repayments

Our personal loan repayments calculator can show you what kind of borrowing scenario might work. 

For example: Say you borrow $20,000 with a 10% interest rate. Using our personal loan repayments calculator, your monthly repayments would be either:

• $923 paid back over 2 years

• $425 paid back over 5 years

Keep in mind that while the longer term option might relieve some financial pressure each month, the downside is that you’ll pay $3,346 more in interest over the life of the personal loan.

Lastly, the benefit of fortnightly repayments is that you’ll wind up paying off more of the loan within a year, as opposed to with monthly repayments.

For example, with monthly repayments of $1,000, you’d pay off $12,000 in one year. But with fortnightly repayments of $500, you’d pay off $13,000 in one year, given there are 26 fortnights in the year.

So, by going with fortnightly repayments, you’d shave off an extra $1,000 for each year of the loan, helping to speed up the process of paying it off.

Last word: Credit history

Some lenders offer a range of different interest rates on personal loans depending on what kind of borrower you are. 

Generally, the better your credit history is, the better the interest rate you’ll get. So, if you’ve got a great credit rating, opting for a loan that offers tiered interest rates based on your credit score might help you snag a lower rate.

Okay, so you're up to speed on personal loans - time to compare! Here at Mozo, we believe comparison makes your money count for more. We work hard to ensure you have the most up-to-date product information and personal loan insights at your fingertips. Read more about our fact-checking process here.

If you'd like to review some of the best personal loans in our database, be sure to visit our hub page that showcases our most recent Mozo Experts Choice Awards winners.